Beware of Falling Minimum Payments

If you opened a credit card statement recently and were pleasantly surprised to find that your minimum payment due was lowered, don't be so quick to "jump for joy". What may appear as a small boost to your monthly budget is actually the rock that can weigh you down in debt for a lifetime.

More and more credit card companies are moving to requiring a minimum payment of 2% of your total outstanding balance. Consumer Action, a consumer advocacy group out of San Francisco, found that the number of card companies with a 2% minimum payment reached 53%, up from 43% just a year ago.

Some creditors have even gone so far as to call this a "consumer friendly" move claiming it will assist consumers faced with today's economic woes. In reality, a lower minimum payment causes you to take longer to pay off your debt to the creditor while winding up paying them more money in interest payments.

For example, let's say you have a credit card debt of $2500.00 @18% annual percentage rate (APR). Your monthly minimum payment based on a 2.5% pay back rate would be $62.50 per month. Oh and by the way, here's what the credit card company really doesn't want you to know - it will take you 20 YEARS to pay off your $2500.00 balance paying the minimum monthly due. And you will have paid the credit card company $3,365.51 in interest!

Now lets look at the same example using the rate of 2% minimum monthly payment. Your monthly payment drops to just $50.00 a month. You might be tempted to think "wow, I've got an extra $12.50 a month to play with, yippeee!". Not so fast! That lower minimum payment now means it will take you 34.5 YEARS to pay off your balance of $2500.00 and you'll wind up paying $6,430.93 in interest!

Consumer Action also reports that many credit card companies are imposing higher late payment fees and "more than a third of card issuers said they will raise existing cardholders' rates because of poor credit histories -- with other creditors -- even if the consumer has made regular, timely payments with that issuer".

My advice is to watch your use of credit carefully, always pay more than the minimum monthly due, and be sure to read the fine print on any credit card offers or changes to your existing accounts.

? 2004, www.yourfreecreditreportnow.com
Author: James H. Dimmitt
James is editor of "TO YOUR CREDIT", a weekly free newsletter. Subscribe to the newsletter by visiting http://www.yourfreecreditreportnow.com.

---

Read and Understand Your Credit Card Statement

Have you ever looked at your credit card statement and ended up just scratching your head in frustration? Well join the club! But don't take any comfort in the fact that you have... Read More

Credit Report ? Check Yours Regularly - and for Free

In the twenty-first century, there are few documents that have a greater impact on the lives of Americans then their credit report. Credit rating determines one's ability to buy a home, a car,... Read More

Stop Struggling Because Of Poor Credit And Improve Credit Rating Now

Did you apply for a personal loan only to be turned down by a bank or lending institution? Like most people there is always a need to borrow money to buy a car... Read More

Our World Of Credit Cards! Which One Is Right For You

There are not many of us who do not have a credit card these days. But, not all of us are as wise in the area of understanding how they work and how... Read More

Boosting Your Credit Score To Get The Best Credit Card Deal

Making Your Credit Rating Work For YouOne of the basics of getting the most competitive credit card deal in the market is to ensure you have the best credit record possible. Few of... Read More

Good vs. Bad Credit Debt

Do you know the difference between good and bad credit debt? Most everyone seems to think that all debt is bad, but that is not always the case. In fact, there are some... Read More

Credit Cards: Pros and Cons

Sure, there are a lot of problems with credit cards, but there are a lot of good things attached to them as well. For instance, if you have a small business, fleet credit... Read More

The Top 5 Secrets to Managing Your Credit Cards?So They Won?t Manage You

You've probably never heard of Frank X. McNamara, but he revolutionized the way you shop on a daily basis.One evening in 1949, McNamara-head of the Hamilton Credit Corporation in New York City-was dining... Read More

5 Ways To Raise Credit Score

It's not as hard as you think to raise credit score. It's a well known fact that lenders will give people with higher credit scores lower interest rates on mortgages, car loans and... Read More

Choosing a Credit Counseling Company

If you have considered credit counseling as an option to your financial problems, then you are probably wondering how to choose from one of the many credit counseling companies that are popping up... Read More

10 Signs You May Need Credit Counseling

Debt management programs can be of real help for people that discover they cannot face their debts. At first, they will attempt to solve the situation all by themselves by cutting down on... Read More

Lower Your Credit Card Interest Rate Now!

With today's credit card companies, there are many opportunities to get your cards rate of 21% or more reduced. The higher the amount of interest your card charges will cost you more for... Read More

What is a Bad Credit History?

A bad credit history can sometimes seem like a curse... whenever you apply for financing or for a loan, it always seems to pop up and cause you problems.Having a bad credit history... Read More

Important Things to Know About Divorce and Credit

Joint debts remain joint debts.Both spouses signed a legally binding contract with the creditor, and a divorce decree neither amends this contract nor relieves the creditor's investment in you. Amendment of any contract... Read More

Credit Score - Reporting Your Financial Health

Credit score is one of the most basic, determining factor while loan borrowing. Credit score is the criterion for the creditor to ascertain whether to give you credit or not. Credit score is... Read More

Good Credit Is a Necessity for Everyday Living

Most of us want a good credit report to obtain vehicle financing, credit cards for emergencies and luxuries, and to finance a home mortgage. However, beyond these consumer loans, a great credit report... Read More

4 Steps You Can Take If Your Online Credit Card Application Has Been Refused

Help! I've Been Turned DownYou received an envelope in the mail with a great offer for a low interest credit card. You read all the details, even the boring small print and decided... Read More

Your Credit Rating and How To Check It

There is a lot of confusion surrounding UK credit ratings, credit scores, credit blacklists, credit reports, and credit files. This guide to your credit rating aims to give you the facts you need.What's... Read More

Credit Repair: How To Deal With Your Creditors

If you are in danger of credit problems because you have more debts than you can handle, there are things you can do at least keep your creditors reasonably happy.First, prioritize your debts... Read More

Keep Your Credit History Clean - Remove A Negative Credit Record From Credit Report

The three major credit bureaus, Experian, Equifax and Trans Union are similar and feature a "Credit Score", which is created from credit report data submitted to them about you.But very often your credit... Read More

How to Evaluate and Raise Your Credit Score

Why do some people get offers for pre-approved credit cards and others don't? What do car dealers know about your financial health that you don't know? The answer is your credit score.Your credit... Read More

Special Credit Information for Married Couples

If you are married, establish separate credit accounts.Try to finance real estate in just one partner's name to increase your investment financing potential.Avoid joint credit, which limits financing possibilities for both individuals rather... Read More

Credit Help For Renters And Others On The Horizon

Sue is a homeowner and pays her mortgage and other bills on time like a good credit consumer. Sue's on-time mortgage payments are reflected in her credit score profiled by the three major... Read More

New Credit Advice: Dont Pay off Those Credit Cards!

Credit needed for real estate mortgage financing differs from credit needed for consumer loans. If you need help getting a home mortgage, these credit tips will help you.Contrary to what many credit advisors... Read More

Ten Steps To Building A Good Credit History

Are you thinking of buying a house? Do you want to buy a new car to replace that old wreck? Trying to get insurance on you home, auto, or life? In each of... Read More

Discover the Parts of a Credit Report and What They Mean

So you ordered a copy of your credit report to check for inaccuracies and get the most from your credit score. Now how do you read it? Your credit report is read and... Read More

Do You Want to Get a New Credit Card at a Great Rate?

1) Do your homework. Applying for and getting approved for a credit card is nothing more than legwork. Credit card contracts can sometimes contain onerous terms that might make you sorry that you... Read More

Teaching Students To Keep Out Of Credit Card Debt - The Parents Role

Parents have the full responsibility for their children and their education. It is up to parents to teach their children what's right and what's wrong, how to conduct themselves as good citizens, how... Read More

Identity Theft ? How Can You Prevent It Happening to You?

The nightmare of identity theft strikes an estimated 750,000 people every year. How can you keep from being one of them? While there is no guarantee that you won't become a victim, there... Read More