What is a credit card issuer to do when they’ve promised you a low rate for the life of the balance?
Right now they’re all trying to minimize risk and increase profit sources as quickly as possible. Once the new “Credit Cardholder’s Bill of Rights” goes into effect in February they’re going to lose several lucrative sources of income, so they have to do something fast!
Not to fear – they’ve found a way to lower their risk, even if they can’t increase their profits from you. That’s to increase your minimum payment. Their right to do that is probably buried somewhere in the fine print of your contract, so now they’ll take advantage of it.
Unfortunately, when credit was easy and card issuers were luring everyone with low fixed rates and high credit lines, some of us came to view credit cards as easily accessible long-term credit. Rather than going to a bank to get a home equity loan for that remodeling job, we put it on the credit card. Rather than paying 6, or 8 or 10 percent on a loan for a used car, we wrote a cash advance check on a credit card.
That worked well for many, as long as the credit issuer stayed with the terms they offered at the outset. But now, consumers with a balance of $20,000 or more on a credit card are finding themselves between a rock and a hard place.
Yes, the low rate is still the same, but the minimum payment may have doubled or tripled!
It’s hard to understand the rationale behind these moves, because moving a minimum payment out of the consumer’s ability to pay is likely to result in the very defaults that the banks were worried about. A person who could manage a $500 payment may throw up his or her hands in defeat when told that they must come up with $1,200 per month.
Some financial advisors say to call the company and explain your situation. Tell them you can definitely continue to pay your old monthly minimum, but that the increase could push you over the edge into bankruptcy – in which case, they’ll get nothing. In some cases, especially if you’ve never been late with a payment, they may agree to revert to your old minimum.
If that won’t work, start looking for a fixed rate loan that will allow you to pay off the card. You’ll no doubt pay higher interest, but your monthly payment will be manageable.
Author:Marte Cliff
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