Your Credit Card Payment Is Rising: Warning Tips - Page 2
How Much Will Credit Card Minimums Increase? For many credit cards, such as MBNA and Bank of America, the new rates mean that monthly minimum payments will double.
*Right now, the monthly minimum payment is only 2% of the balance on most of these cards. The new rate will be around 4% (the actual number may vary from card issuer to card issuer). This means that if you have the average American credit card balance of about $10,000, your minimum monthly payment will go from $200/month to $400/month. *Of course, if you have any additional fees, whether a late fee or a cash advance fee or any of the other fees that the credit card guys cook up, you will have to pay that, too.
Why the Credit Card Minimum Payment Increase? You may be wondering why anyone would want to make you pay a higher minimum monthly payment. The basic reason for making you pay more is: for your own good.
According to Mike Peterson, co-founder of American Credit Foundation, by doubling the amount you pay per month toward credit card debt, you will cut down on what you pay toward interest by much more. Look:
*Old monthly minimum payment of 2% of balance, $2,000 credit card debt at 18% percent interest:
*Time to pay off debt in full: about 30 years.
*Interest paid: about $5,000-two and a half times what you initially borrowed!
*New monthly minimum payment of 4% of balance, same debt:
*Time to pay off debt in full: about 10 years. Time saved vs. old payment: 20 years.
*Interest paid: about $1,100-slightly more than half what you originally borrowed.
Amount saved vs. old payment: $3,900.
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