FYI: credit card payment changes

Gary, you might want to put a link to this in the General Forum.

When I told my wife this…she got this funny look on her face.

Thanks for the heads up Gary. Very interisting.

I have to do more research before I go any further on this, for I do not want to give out any “false information”.

Let me go to work on this and see what I can dig up the next couple of days.

Wonder what kind of other changes we will see from the credit card companies. Would think they will need to come up with other ways to make up for the lost revenue the will see by not having the large balances to charge intrest on. My guess would be to see a decline in the perks a person gets for purchases on your credit card. Maybe higher user fees.
These companies deal in finance and if they are forced to take a hit in one area you can be sure they have the know how to recoup the loss some where else.

Actually;

Alot of this is due to credit card companies heading into financial trouble, because they are lending money out but not getting it back, only the interest.

Then there is a small percentage of people who file bankruptcy that wipes the debt away.

This is all part of the government establishing laws and regulations to make people responsible for the money that they are borrowing.

Similar to the new laws put in place to make it difficult for the “average Joe” to file bankruptcy, just to walk away from their debt, this is established for the same reason.

When you look at the big picture, it is a good thing for the consumer, even though short term is going to create hardship without doubt!

“Today’s consumer”, goes and gets a credit card, or 5 credit cards, with $1000 or $5000 limits. Over a short period of time, all credit cards are maxed out and the consumer has NO ability to pay it back.

With that said, they are stuck paying the minimum payment for 22 years, until the card is paid off in full. So, that potential $25,000 cost the consumer $50,000.

When you look at the above, it used to be very simple and painless for a consumer to go file Chapter 7 bankruptcy and wipe it clean. This, along with proper management of credit and funds can put the person right back on top of the game and in outstanding credit status in as little as 24 months.

Wait another 7 years and do it all over again……….

That used to be the life style of some consumers. The new laws put into place prevents this from happening.

This is a premature notice that the government is changing the required minimum payment on all credit cards.

The changes are going to be from the standard 2.5% of your monthly balance to a proposed 5% to 10% payment of your balance.

The changes are to be put into effect Jan 1, 2006.

So, essentially what this means is that if you have a $1000 balance on a credit card, instead of a $25 to $50 dollar minimum payment, it will be raised to $100 to $150 minimum payment.

These changes are being put into effect to protect the consumer from having a $1000 credit card balance and not paying it off for 22 years, based on the standard minimum payments made.

It is also being put into effect in conjunction with the new bankruptcy laws, to prevent consumers from racking up thousands of dollars in credit card balances, then filing Chapter 7 bankruptcy to wipe it clean.

Before you plan on spending Christmas on “plastic” do your research on these new laws coming into play. For it may mean drastic changes in your monthly operating expenses.

This now, maybe a time to consider refinancing your home and consolidating debt to eliminate shortages on monthy cashflow.

In the next week or two, I’ll post the changes once it has been finalized through Congress and made public.

Gary, you might want to put a link to this in the General Forum.

When I told my wife this…she got this funny look on her face.

Gary, you might want to put a link to this in the General Forum.

When I told my wife this…she got this funny look on her face.

Thanks for the heads up Gary. Very interisting.

Thanks for the heads up Gary. Very interisting.

I have to do more research before I go any further on this, for I do not want to give out any “false information”.

Let me go to work on this and see what I can dig up the next couple of days.

I have to do more research before I go any further on this, for I do not want to give out any “false information”.

Let me go to work on this and see what I can dig up the next couple of days.

Wonder what kind of other changes we will see from the credit card companies. Would think they will need to come up with other ways to make up for the lost revenue the will see by not having the large balances to charge intrest on. My guess would be to see a decline in the perks a person gets for purchases on your credit card. Maybe higher user fees.
These companies deal in finance and if they are forced to take a hit in one area you can be sure they have the know how to recoup the loss some where else.

Wonder what kind of other changes we will see from the credit card companies. Would think they will need to come up with other ways to make up for the lost revenue the will see by not having the large balances to charge intrest on. My guess would be to see a decline in the perks a person gets for purchases on your credit card. Maybe higher user fees.
These companies deal in finance and if they are forced to take a hit in one area you can be sure they have the know how to recoup the loss some where else.

Actually;

Alot of this is due to credit card companies heading into financial trouble, because they are lending money out but not getting it back, only the interest.

Then there is a small percentage of people who file bankruptcy that wipes the debt away.

This is all part of the government establishing laws and regulations to make people responsible for the money that they are borrowing.

Similar to the new laws put in place to make it difficult for the “average Joe” to file bankruptcy, just to walk away from their debt, this is established for the same reason.

When you look at the big picture, it is a good thing for the consumer, even though short term is going to create hardship without doubt!

“Today’s consumer”, goes and gets a credit card, or 5 credit cards, with $1000 or $5000 limits. Over a short period of time, all credit cards are maxed out and the consumer has NO ability to pay it back.

With that said, they are stuck paying the minimum payment for 22 years, until the card is paid off in full. So, that potential $25,000 cost the consumer $50,000.

When you look at the above, it used to be very simple and painless for a consumer to go file Chapter 7 bankruptcy and wipe it clean. This, along with proper management of credit and funds can put the person right back on top of the game and in outstanding credit status in as little as 24 months.

Wait another 7 years and do it all over again……….

That used to be the life style of some consumers. The new laws put into place prevents this from happening.

Actually;

Alot of this is due to credit card companies heading into financial trouble, because they are lending money out but not getting it back, only the interest.

Then there is a small percentage of people who file bankruptcy that wipes the debt away.

This is all part of the government establishing laws and regulations to make people responsible for the money that they are borrowing.

Similar to the new laws put in place to make it difficult for the “average Joe” to file bankruptcy, just to walk away from their debt, this is established for the same reason.

When you look at the big picture, it is a good thing for the consumer, even though short term is going to create hardship without doubt!

“Today’s consumer”, goes and gets a credit card, or 5 credit cards, with $1000 or $5000 limits. Over a short period of time, all credit cards are maxed out and the consumer has NO ability to pay it back.

With that said, they are stuck paying the minimum payment for 22 years, until the card is paid off in full. So, that potential $25,000 cost the consumer $50,000.

When you look at the above, it used to be very simple and painless for a consumer to go file Chapter 7 bankruptcy and wipe it clean. This, along with proper management of credit and funds can put the person right back on top of the game and in outstanding credit status in as little as 24 months.

Wait another 7 years and do it all over again……….

That used to be the life style of some consumers. The new laws put into place prevents this from happening.

Gary, I don’t understand how the Gov. expects this to work unless its only on new credit cards or on new charges after Jan. 1st as where does all the money come from? For example, if someone is only paying the minimum amount, lets say 100.00 plus per month [2.5 ] and its raised to 5% to 10% which may be hundreds of dollars more just where does the Gov think that person is going to get the extra money from? And if that person would have several credit cards like was mentioned that it could be thousands more. Now if that person can only pay the smallest amount before they certainly can’t hundreds more and especially thousands more. Somebodies not thinking here and its not just the person who is in big credit card debt. Sounds like a very good way to make the economy crash for sure unless it would be only on new cards and make the current card charges come to a halt for any more charges.

Thanks, Bill

Gary, I don’t understand how the Gov. expects this to work unless its only on new credit cards or on new charges after Jan. 1st as where does all the money come from? For example, if someone is only paying the minimum amount, lets say 100.00 plus per month [2.5 ] and its raised to 5% to 10% which may be hundreds of dollars more just where does the Gov think that person is going to get the extra money from? And if that person would have several credit cards like was mentioned that it could be thousands more. Now if that person can only pay the smallest amount before they certainly can’t hundreds more and especially thousands more. Somebodies not thinking here and its not just the person who is in big credit card debt. Sounds like a very good way to make the economy crash for sure unless it would be only on new cards and make the current card charges come to a halt for any more charges.

Thanks, Bill

Gary, I don’t understand how the Gov. expects this to work unless its only on new credit cards or on new charges after Jan. 1st as where does all the money come from? For example, if someone is only paying the minimum amount, lets say 100.00 plus per month [2.5 ] and its raised to 5% to 10% which may be hundreds of dollars more just where does the Gov think that person is going to get the extra money from? And if that person would have several credit cards like was mentioned that it could be thousands more. Now if that person can only pay the smallest amount before they certainly can’t hundreds more and especially thousands more. Somebodies not thinking here and its not just the person who is in big credit card debt. Sounds like a very good way to make the economy crash for sure unless it would be only on new cards and make the current card charges come to a halt for any more charges.

Thanks, Bill

Bill;

You are exactly correct with your assumptions. This is going to create havoc with alot of people who are “over their head” on credit card debt today. There is no doubt about that.

The changes will be implemented first on cards such as Bank of America, MBNA, CitiBank, and others.

Currently;
Your credit card payment on an “average” credit card is scheduled on a 20 year amortization payment. This means that if you pay the minimum amount each month, you will pay off your balance is 20 years.

The federal government has changed laws, making these cards to be paid off in a 10 years amortization schedule, meaning your minimum payment each month will pay the card off in 10 years.

With that said, most cards are only going to jump up to double payments.

HOWEVER: That is with the average card, which has the interest rate of 12 to 15 percent.

With people who have credit cards that are at 20 to 29 percent, the payment is going to go higher.

The justification for the government doing this is to protect the consumer, from going to Sears for example and buying a kitchen full of new appliances on credit cards. You may spend $7,500 for all of your new appliances, however once it is said and done, you are going to pay $15,000 for those appliances.

What makes this worse, is that 95% of the use for a credit card, the purchase has no equity value. Meaning that what people purchase on their cards, they cannot sell, nor is there any “depreciation” on their purchase.

You can’t purchase a car, boat, snowmobile, 4-wheeler, or camper on a 20 year amortization because the “life” of those products in only 5 to 10 years. However you can go buy “Christmas, gas, a nice dinner out on the town, a vacation, etc, etc, etc on a credit card and pay it off in 20 years.

The federal government is trying to prevent the credit card companies from reaping in 20 years of interest on purchases with no value.

In short, YES this is going to impact alot of people, who live on paycheck-to-paycheck and have credit cards maxed out today.

However;
It is going to be a deterent for people to do this “tomorrow”.

It is going to force people to live within their means and budget.

Good deal. Hope this means lots of items being sold very cheap this next year. If you dont like it learn to live debt free.

Bill;

You are exactly correct with your assumptions. This is going to create havoc with alot of people who are “over their head” on credit card debt today. There is no doubt about that.

The changes will be implemented first on cards such as Bank of America, MBNA, CitiBank, and others.

Currently;
Your credit card payment on an “average” credit card is scheduled on a 20 year amortization payment. This means that if you pay the minimum amount each month, you will pay off your balance is 20 years.

The federal government has changed laws, making these cards to be paid off in a 10 years amortization schedule, meaning your minimum payment each month will pay the card off in 10 years.

With that said, most cards are only going to jump up to double payments.

HOWEVER: That is with the average card, which has the interest rate of 12 to 15 percent.

With people who have credit cards that are at 20 to 29 percent, the payment is going to go higher.

The justification for the government doing this is to protect the consumer, from going to Sears for example and buying a kitchen full of new appliances on credit cards. You may spend $7,500 for all of your new appliances, however once it is said and done, you are going to pay $15,000 for those appliances.

What makes this worse, is that 95% of the use for a credit card, the purchase has no equity value. Meaning that what people purchase on their cards, they cannot sell, nor is there any “depreciation” on their purchase.

You can’t purchase a car, boat, snowmobile, 4-wheeler, or camper on a 20 year amortization because the “life” of those products in only 5 to 10 years. However you can go buy “Christmas, gas, a nice dinner out on the town, a vacation, etc, etc, etc on a credit card and pay it off in 20 years.

The federal government is trying to prevent the credit card companies from reaping in 20 years of interest on purchases with no value.

In short, YES this is going to impact alot of people, who live on paycheck-to-paycheck and have credit cards maxed out today.

However;
It is going to be a deterent for people to do this “tomorrow”.

It is going to force people to live within their means and budget.

Bill;

You are exactly correct with your assumptions. This is going to create havoc with alot of people who are “over their head” on credit card debt today. There is no doubt about that.

The changes will be implemented first on cards such as Bank of America, MBNA, CitiBank, and others.

Currently;
Your credit card payment on an “average” credit card is scheduled on a 20 year amortization payment. This means that if you pay the minimum amount each month, you will pay off your balance is 20 years.

The federal government has changed laws, making these cards to be paid off in a 10 years amortization schedule, meaning your minimum payment each month will pay the card off in 10 years.

With that said, most cards are only going to jump up to double payments.

HOWEVER: That is with the average card, which has the interest rate of 12 to 15 percent.

With people who have credit cards that are at 20 to 29 percent, the payment is going to go higher.

The justification for the government doing this is to protect the consumer, from going to Sears for example and buying a kitchen full of new appliances on credit cards. You may spend $7,500 for all of your new appliances, however once it is said and done, you are going to pay $15,000 for those appliances.

What makes this worse, is that 95% of the use for a credit card, the purchase has no equity value. Meaning that what people purchase on their cards, they cannot sell, nor is there any “depreciation” on their purchase.

You can’t purchase a car, boat, snowmobile, 4-wheeler, or camper on a 20 year amortization because the “life” of those products in only 5 to 10 years. However you can go buy “Christmas, gas, a nice dinner out on the town, a vacation, etc, etc, etc on a credit card and pay it off in 20 years.

The federal government is trying to prevent the credit card companies from reaping in 20 years of interest on purchases with no value.

In short, YES this is going to impact alot of people, who live on paycheck-to-paycheck and have credit cards maxed out today.

However;
It is going to be a deterent for people to do this “tomorrow”.

It is going to force people to live within their means and budget.

Good deal. Hope this means lots of items being sold very cheap this next year. If you dont like it learn to live debt free.

Good deal. Hope this means lots of items being sold very cheap this next year. If you dont like it learn to live debt free.

Gary, how about with people who have credit cards with 6% to 8% interest rates? [you mentioned higher interest card rate cards] I myself need to decide if I’m going to keep putting into an IRA next year through my work place the same amount I’m putting in this year. [have alot of catching up to do] If my card payment doubles then I have to put in alot less. I just divided out my balance by what amount my payment is actural payoff money and if paying the same each month for 4 years it will be paid off. If that payment doubles then theres no IRA money so to speak.
Thanks, Bill

My true, solid, best recommendation is to contact your credit card companies and find out their intentions.

I know some companies have sent out information already to their clients. However, we all throw away our “junk mail” we get with our credit cards.

Honestly, to some, this is going to be relatively painless. To others I’m afraid, it is really going to hurt.

In all my searching on this, I cannot find the actual federal press release on this. Everything that I can find is soley based on 2nd and 3rd hand media reporting, which leads into biased statements and information.

Again, the consumers should really contact their credit cards companies to find out how it is going to impact them.

Gary, how about with people who have credit cards with 6% to 8% interest rates? [you mentioned higher interest card rate cards] I myself need to decide if I’m going to keep putting into an IRA next year through my work place the same amount I’m putting in this year. [have alot of catching up to do] If my card payment doubles then I have to put in alot less. I just divided out my balance by what amount my payment is actural payoff money and if paying the same each month for 4 years it will be paid off. If that payment doubles then theres no IRA money so to speak.
Thanks, Bill

Gary, how about with people who have credit cards with 6% to 8% interest rates? [you mentioned higher interest card rate cards] I myself need to decide if I’m going to keep putting into an IRA next year through my work place the same amount I’m putting in this year. [have alot of catching up to do] If my card payment doubles then I have to put in alot less. I just divided out my balance by what amount my payment is actural payoff money and if paying the same each month for 4 years it will be paid off. If that payment doubles then theres no IRA money so to speak.
Thanks, Bill

Thanks Gary.
Thanks, Bill