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[05:21:20 AM Thursday, October 25, 2007]
Why Not Making Minimum Credit Card Payments?Debts of the credit cardholders have been a weak point of the credit industry in the US. Consumers' debts keep bringing disadvantages for both cardholders and credit card lenders. If quite a lot of cardholders actually do not mind having debts and paying only monthly minimum on their card deal, the US Treasury Department is not that happy about it. Department has made a point of extirpating the unfair credit card practices that are aimed at keeping you in (the deeper the better) debts. Why are these credit card practices so unfair? It may seem to you that paying monthly minimums is not that bad. Why is it not that good really? But if you think a little bit deeper, it will become clear that when you pay only the minimum (sometimes not even that much) it keeps you in continuous credit card debt. Just think that your credit card company provides for that - it actually makes greater revenues. As for credit card holders, they are so much ok with the minimum monthly payments that they are lazy even to calculate the final cost of the credit card offer after paying off the balance. And this final cost is just enormous. Here is where the injustice is hidden. You could reduce the overall card cost by paying more than the monthly minimum. At present some of the credit card companies have favored the new regulation introduced by the Treasury Department and have (already!) increased monthly minimum payments. In case you have not experienced this new regulation on your credit deal, believe that it is just a matter of time. The next time you receive your card statement don't be surprised that the sum of a monthly payment has doubled! But if you think so - you are an irresponsible customer and you had better realized that. But you will definitely start feeling the difference especially if you have got, for instance, an expensive cash back card deal. The difference will be obvious at the end when paying your balances off. Initially, if you were supposed to repay all the balance in 18-19 years (for instance), with the new minimum payments you will be done in 7 years already. And all this is possible with a double less interest. The question is - why does the total interest decreases if it was just doubled by the credit card company? It is logical. It happens so because the period of the repayment decreases and, as a result, the interest is applied to fewer months. It is undoubtedly a good side of the implemented regulation. It will have a positive effect on consumers credit cards. The other side is that this new regulation will probably make ones spending habits. Certainly, it doesn't mean that credit cardholders will become all so responsible. But they might understand that delaying the minimum payments or (what is worse) just not making them, will lead to the interest increase or will result in unmanageable debt.
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