I may be the last one on the block to hear this tidbit, but in case you hadn't heard about this either, credit card companies are going to increase their minimum monthly payments, some as soon as---well, NOW. Google around and you can find lots of stories on this. For example, here's one. Yes, increasing monthly minimums will mean people can, in theory, pay off their debt faster---but only if they cease to add to their debt. On the other hand, I don't think the majority of Americans want their hand held with regard to their spending habits. If minimum payments suddenly double, I think we are going to see a lot of people suddenly unable to meet their minimum payments. Who does this change really serve in the end? Does it benefit the credit card companies somehow? Does it somehow curb inflation or something like that? What do ye sages of BigSoccer think?
I heard that credit card companies are getting nervous due to the large amounts of debt people in the US are holding. That, and the possibility of an economy slowing down may cause them to want to get as much $$ now as possible. Anyone heard that there was some Congessional pressure?
I know that any increase in minimum payments will be a really tough pill for a lot of people to swallow, so I really sympathize with those who are going to find themselves in a bind. But while this pill might be really tough to get down the throat, it's still good medicine. I was making minimum payments on some credit cards for a while, and barely denting the balance, especially after taking annual fees into account. OTOH, I had a $600 bill at Target and they demanded monthly payments of $29, or nearly five percent. I just made it an even $30 and kept on paying $30 a month even though Target's minimum required payments dropped. When that balance, as high as the interest was (24 percent at times!), dropped below the other cards' balances, I sat up and took notice and tried to at least double, if not triple, the other card payments as well. I have advantages in my current situation that not everyone has, but I was able to make that adjustment without very much pain. And I strongly recommend that course of action to anyone.
My thinking is that it depends on the individual. Some need to a fire lit under their ass to make higher payments. It's painful in the short term, but beneficial in the long term. The keys are effective planning & discipline. You can have the greatest plan to get out of debt, but if you don't stick to it, it's going to fail. And the planning must be reasonable. If you create a budget where you plan to save $$$ on food by eating nothing but Ramen Noodes for a year, well, that's a plan that's gonna fail.
In the long term, it's probably good news. But there is a lot of pain coming short term. It would be nice if people didn't get in that situation in the first place.
I consider myself pretty fortunate. I would not be able to afford double-whammy premiums each month, but in December my husband & I worked out a plan to consolidate our CC debt w/a low-interest secured loan, whose monthly payments we *can* afford. We didn't go so far as to cut the credit cards in half, but we put them away in a drawer in the kitchen and stopped all our auto-bill-pay things that went straight to cards. What I feel great about is knowing that our loan debt is structured to disappear over time, while CC debt seems structured to self-perpetuate. Why isn't personal finance a life-skill people are expected to acquire, as they are expected to be literate? It's not OK to say, "Oh, yeah, me---I don't read," but there are a lot of people out there who say, "Oh, yeah, me---I don't really know how to budget." It only took me. oh, 35 years to learn...
I agree. It's a shame more people don't better understand their finances. I fail to see how congress regulating minimum payments is going to help change that. In fact, is likely 's going to make it harder for low income people to get unsecured credit in the form of credit card debt. I'm sure the pawn shops and paycheck advance companies will be happy with that.
We had to take a personal finance class in 8th grade in Virginia. Seeing how little public schools manage to teach these days, I think adding personal finance would break them. At least you did learn, chilistrider... I know lots of people who never did. Sachin
There seems to be an ongoing misconception on where this change comes from. The Federal Reserve which regulates banks, has asked the credit card issuing banks to up the minimum payments, not Congress. The Fed is concerned that consumers are paying too much interest to service their debt.