Increased Credit Card Payments – Helping You Keep Up
In the past, credit card payments have always been fair, a small percentage of the total balance owed. A new change has recently been proposed by the government that may change this. The monthly credit card payments that people are making may double within the next year. This will make things much harder for people who are already having a hard time making their existing payments.
How Much You Will Now Need To Pay
The credit card companies have made large profits by allowing people to make small payments on their credit card balances. The interest rate on credit cards has gone as high as 20%. At this rate, it can take a person years to pay off debts that are just a few thousand dollars. It does little good to make only the minimum payments on your credit card each month. Because the average American owes about $10,000 in credit card debt, their monthly payments are about $200. The new proposed law would push this amount to $400, including interest.
The law proposed by the federal government has been in existence for two years, but companies have been given a set period of time to comply with the law. It is expected that lenders will raise the payments to 4% before the end of this year. At first glance this may seem like a small amount, but it will dramatically increase the monthly payments of those who owe thousands of dollars. Many people have already begun filing for bankruptcy. You are probably wandering what you should do in a situation like this.
If You Can’t Pay
The first thing you can do is stop using your credit cards. It doesn’t make much sense to keep using it when the minimum payments are about to be increased. After this you will want to begin cutting back on bills that will keep you from being able to make your monthly payments. If you have equity in your home, you will want to use it to consolidate your loans if possible. An unsecured personal loan can also be helpful. It may also be possible to get a lower interest rate from your bank.
There’s No Going Back Now
One thing you have to understand is that when the minimum payments increase, they are not likely to come back down. While this will allow some people to pay off their debts faster, many more people will not be able to pay off their loans, and will be forced to file bankruptcy. Some people believe that such a law will hurt the economy, because by raising the cost of the minimum payments you will decrease the purchasing power of the citizens.
Financial Freedom is the Key
It is best to get out of debt in anyway you can, or reduce your interest rates. If you don’t have a credit card, you may want to avoid getting one. You should sit down and be honest with yourself to decide if you’re responsible enough to manage one. If not, it is best to use cash. It has become more difficult to get out of debt than ever before, and this will not change in the future. It is important for you to take the steps today that can allow you to reduce your financial burden. You should stop using your credit card as soon as possible.
On a Personal Note – Living In Never Never Land
Many experts have argued that increasing the monthly payments on loans will help people and I for one must agree with that. Even at this increased amount consumers will be paying an exorbitant amount in interest and fees given the average balance of an American’s credit card statement. These high interest-charging credit cards have been sucking the money from many of us who are blissfully unaware of the financial damage that they are causing. Short-term financial strain in increasing these minimum payments may be the best long-term strategy to find the growing debt problem in the US. A change in attitudes by many of us would also be a start of a brighter financial future.
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October 18th, 2009 at 11:23 am
making payments on a card you have had for a while helps your credit because you have more of a history that way.
October 18th, 2009 at 11:35 am
Already. No. Things to look for when getting a card include: no annual fee, low FIXED APR. When I turned 18 I obviously didn't have credit either. So I ended up applying everywhere(which is bad for your credit) and eventually just applied to a credit card offer in the mail(When I was 19). It was a Chase card NO annual fee but the APR was a horrible 19.99% FIXED. I was approved for a $200 or $500 credit limit. Then I got a Cap 1 offer in the mail and thought well "Whats in my wallet?" lol so I was approved for that one at $500 for 19.99 FIXED. (The bad thing about Cap 1 is that they DO NOT report your credit limit, so your credit goes off the highest balance you had on the card.) The only reason I settled for those high rates was because I knew I needed to establish credit and eventually I could get the rates down. Then a year later I applied for a rewards card through my credit union and was approved for $500 at 7.9% FIXED!! So that was awesome. Then my boyfriend had to apply for a SONY card and since we like to see who has better credit I did too. Approved for $2000 at a whopping 14.99%(Not something any reasonable person would sign up for unless you are only using it to get the reward points and pay off the balance every month like we do.) Anyway, I am 21 now and the APR on my cards range from 7.9% Fixed to 9.99%Fixed. (Got Both CAP 1 and Chase to lower the APR) Oh and the credit limits are much higher. If you sign up for a crappy APR card just be sure to pay the balance off every month(just like you should with any card no matter the APR) Just be smart with your credit.
October 19th, 2009 at 3:34 pm
October 20th, 2009 at 12:37 am
Some hard reality for you. If you can't afford the increased minimum payment, you really should not be worrying about your credit score right now. The reason being that the only reason you need a good credit score is to obtain new credit. But if you obtained new credit that would mean that you would have an additional payment(which you have said you can't afford). Also, if you are almost maxed out and are only paying the minimum right now, your score is already suffering.
You may want to attempt to open another card with a 0% Balance Transfer. If that is not possible then close out this account to keep the better rate. Especially if you will have a hard time with the higher rate. Because becoming delinquent on the account will be much worse than having it closed but still paying current.
October 20th, 2009 at 5:06 am
October 20th, 2009 at 9:00 pm
I agree with Brian about a secured card being no different than a regular card.
Since they refunded the security deposit the card is no longer a secured card but is a regular credit card.
It sounds like this is your only credit card (?). If so, I wouldn't recommend closing it, even if you apply for a credit card with another creditor.
Revolving credit (credit cards) does help build up your scores more than any other type of credit.
If you apply and recieve a card with another creditor, use your BOA card once or twice a year for small purchases and pay in full when you receive the statement.
You might also call BOA and ask them to reduce your interest rate (if it is high) and also request a credit limit increase.
October 21st, 2009 at 3:12 am
783 is a decent score even with a limited credit history.
If you are planning on getting a car loan within the next 6 to 8 months, now is not the time to apply for credit cards.
Applying for cards right now will hurt more than help even with the limited credit history you have.
The first thing that will hurt will be the inquiries from applying for credit cards.
The second thing that will hurt would be the "new account" if you are approved for a card.
October 21st, 2009 at 4:17 am
The easiest way to boost your credit score is to keep your inquiries to NONE until you buy your car. You are allowed 3 inquiries every 90 days, after that you lose 2 points for each one. When you do buy your cay, the finance manager at the dealership will go over your credit report with you, wait until then to check it again. Every extra point you can get and can keep by then will help. Also, say you are going to put $2-3k down at first, the finance manager will go over your options and a range of your APR%. After they tell you your options, ask if putting a total of $5k down instead will lower your rate. IT WILL. But if you play all your cards right away the dealership will take advantage and make a little extra money on you. If you would like some more tricks or tips email me, I'd be happy to help.
October 21st, 2009 at 8:53 am
Even with that balance his usage is still below 30% so it should not affect your score in a negative way at all.
Besides, F.I.C.O. changed the way that credit scores are calculated in September and authorized user accounts are no longer used to calculate scores.
So, you are standing on your own already. Drop yourself from the account, you no longer need it.
Authorized users are not responsible for payment of debt.