Beware of Falling Minimum Payments

If you opened a credit card statement recently and were pleasantly surprised to find that your minimum payment due was lowered, don't be so quick to "jump for joy". What may appear as a small boost to your monthly budget is actually the rock that can weigh you down in debt for a lifetime.

More and more credit card companies are moving to requiring a minimum payment of 2% of your total outstanding balance. Consumer Action, a consumer advocacy group out of San Francisco, found that the number of card companies with a 2% minimum payment reached 53%, up from 43% just a year ago.

Some creditors have even gone so far as to call this a "consumer friendly" move claiming it will assist consumers faced with today's economic woes. In reality, a lower minimum payment causes you to take longer to pay off your debt to the creditor while winding up paying them more money in interest payments.

For example, let's say you have a credit card debt of $2500.00 @18% annual percentage rate (APR). Your monthly minimum payment based on a 2.5% pay back rate would be $62.50 per month. Oh and by the way, here's what the credit card company really doesn't want you to know - it will take you 20 YEARS to pay off your $2500.00 balance paying the minimum monthly due. And you will have paid the credit card company $3,365.51 in interest!

Now lets look at the same example using the rate of 2% minimum monthly payment. Your monthly payment drops to just $50.00 a month. You might be tempted to think "wow, I've got an extra $12.50 a month to play with, yippeee!". Not so fast! That lower minimum payment now means it will take you 34.5 YEARS to pay off your balance of $2500.00 and you'll wind up paying $6,430.93 in interest!

Consumer Action also reports that many credit card companies are imposing higher late payment fees and "more than a third of card issuers said they will raise existing cardholders' rates because of poor credit histories -- with other creditors -- even if the consumer has made regular, timely payments with that issuer".

My advice is to watch your use of credit carefully, always pay more than the minimum monthly due, and be sure to read the fine print on any credit card offers or changes to your existing accounts.

© 2004, www.yourfreecreditreportnow.com
Author: James H. Dimmitt
James is editor of "TO YOUR CREDIT", a weekly free newsletter. Subscribe to the newsletter by visiting http://www.yourfreecreditreportnow.com.

---

10 Simple Steps to Manage Your Credit

By far the greatest invention the banks have ever come... Read More

Watch Out For Credit Repairs

It is very easy to find a site that is... Read More

Building Business Credit

Most businesses want to be able to borrow money when... Read More

Winning The Credit Game!

Everywhere we go, the word credit can be found, shining... Read More

Free Credit Reports Now Available From the FTC

The Federal Trade Commission (FTC) has set up a new... Read More

Low Interest Credit Cards Have Many Advantages

When credit cards are used wisely they can be very... Read More

The Best Strategy To Erase Credit Card Debt

Credit card debt is a growing sickness in the United... Read More

5 Ways To Prevent Credit Card Late Fees

Paying a credit card late fee is the same as... Read More

Learning the Disturbing Facts about Credit Card Debt

When I received my first credit card in the mail... Read More

Credit Reports Inside and Out

The Credit Report is like your scorecard in the lending... Read More

Finding and Applying for the Right Credit Card Offer Online

Anywhere you go online nowadays, you will see a multitude... Read More

How Do I Establish A Good Line of Credit?

A line of credit, roughly defined, is the amount of... Read More

Credit Cards - The Top 3 Things You Need To Know

Today there are so many different credit cards available, student... Read More

Shoppers Beware - Tis The Season

It's the number one complaint from consumers and it only... Read More

Warning: Todays Non Profit Credit Counselors Are Yesterdays Bill Collectors!

Here's a dirty secret, today's "non profit credit counselors" are... Read More

How to Evaluate and Raise Your Credit Score

Why do some people get offers for pre-approved credit cards... Read More

Top 5 Credit Misconceptions

We have all heard the rumors?from neighbors, relatives or friends.... Read More

Credit Report ? Look Out for Your Debit Report, Too

Most consumers are aware that there are companies that keep... Read More

Our World Of Credit Cards! Which One Is Right For You

There are not many of us who do not have... Read More

How Your Credit Rating Affects You, and How to Check It

You might not know it, but every time you take... Read More

Credit Suicide

Few things influence the home buying process more than your... Read More

What is a Credit Report?

Ever wondered what is a credit report? If you've ever... Read More

Everything You Always Wanted To Know About Your Credit Report

Your credit report is a very powerful report that essential... Read More

Different Types of Credit Cards and Features - Part 1

Just as there are too many credit card companies to... Read More

Harassment of People in Debt by Creditors

HarassmentHarassment of people in debt by creditors or their agents... Read More

Good vs. Bad Credit Debt

Do you know the difference between good and bad credit... Read More

How You Can Help Prevent Identity Theft

How can I prevent Identity theft from happening to me?... Read More

Credit Score - Reporting Your Financial Health

Credit score is one of the most basic, determining factor... Read More

Credit Trap: What They Dont Tell You About Credit Cards In College

In industrialized nations, going into debt starts early. It's easy... Read More

Establishing Credit ? What You Need To Know Part 1

Establishing credit is one of the most important things you... Read More

Bounced Checks - Straight Talk On Dealing With Bad Checks (NSF)

A check can be considered bad if it is bogus... Read More

How to Repair a Bad Credit Rating

If you have a bad credit rating, then you might... Read More

What is Credit Repair and How Can It Help You?

There are millions of consumer credit reports on file from... Read More