Handling Credit Card Payment Increases

Have your credit card minimum payments increased? Many have—in 2005 the Federal government ordered credit card companies to increase minimum payments on credit cards in an effort to get outstanding balances paid off more quickly. Although the required payment amount may look scary at first, consumer debt counseling experts say it will help in the long run, if you can work the higher payment into your budget.

The average client at a Consumer Credit Counseling Services (CCCS) agency like ours who is enrolled in a debt management program is paying $5200 toward their debt per year. Those higher monthly payments, say consumer debt counselors, help consumers repay their debt more quickly as well as decrease the amount they spend in interest payments and fees.

For example, consider $1000 of debt at an 18% interest rate. Before last year, it would have taken 19 years to repay the debt in full by making only minimum payments, and taking into account the interest of $1,931. Using the new payment structure it would take someone only 7 years to repay the debt in full, with incurred interest of $515. Consumer debt counselors suggest some tips for leveraging shorter payoff times.

Tips For Speedy Payoff

• Make payments to every creditor. Don't pay some bills one month and others the next. Consumer debt counselors say this not only lowers your credit rating, but the interest and late fees will increase your monthly payments. If you need help meeting your minimum monthly payments, contact a consumer debt counselor for educational advice on how you can best handle your financial situation.
• Follow your budget. A budget will help you track progress toward your financial goals. Staying on budget keeps spending in check so that you don't go further into debt.
• Consider a debt management plan. If you are deeply in debt, a debt management program might be the right solution to your financial issues. One of our consumer debt counselors can negotiate with your creditors to lower payments on credit card accounts, and possibly reduce interest and fees. The professional advice from our Consumer Credit Counseling Services (CCCS) agency is invaluable in helping consumers find creative ways of saving money and reducing overall debt.

Who doesn't want to get out of debt more quickly? The average household has 17 credit cards. The average American owes $8,600 in credit card debt, and according to the American Bankers Association, 58% of consumers carry some debt from month to month. By making larger minimum payments on credit cards every month, consumers will be able to decrease the amount of debt they carry from month to month, and will be more in control of their financial situation in the long run.

Focus on Long-Term Goals

If you need help managing overwhelming debt, consider meeting with a professional Consumer Credit Counseling Services (CCCS) agency to help structure sound financial goals. Consumer debt counselors help you create and maintain a personalized budget. Using an objective approach, a consumer debt counselor can often find ways to save money and lower monthly spending.

The minimum payment increase shouldn't back you against the wall. This is an opportunity to take control of your finances, say consumer debt counselors, and make the increased minimum payment requirement work for you. When you adjust your monthly budget accordingly, you will find yourself able to pay off large balances more quickly and get on the right financial track to becoming debt-free.