By Carl Surran
Credit Card Minimums Move Up
Spring 2006
Does your latest credit card bill ask for a higher minimum payment? If so, you're not alone. Federal regulators have asked credit card issuers to increase required minimums so that consumers will more quickly pay off balances. While the move presents short-term hardships for the most heavily indebted consumers, it is sound long-term public policy.
Consider the case of a $10,000 credit card debt at 18 percent interest. If you pay the average two percent minimum, it would take more than 50 years to pay off the debt, including about $28,300 in interest. Doubling the minimum payment to four percent whacks the payoff to about 13 years and $5,800 in interest.
It's a fact: Making payments greater than the required minimum dramatically lowers the payoff time and the total interest paid.
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