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.

---

Top Stories - Google News Updated : Mon, 08 Feb 2010 23:03:15 GMT+00:00 Tea Party: Life imitating art in Nashville - Los Angeles Times Telegraph.co.uk Tea Party: Life imitating art in Nashville Los Angeles Times Am I the only one to notice the coincidence that the Tea Party Convention met in Nashville, which is also the title of a 1975 Robert Altman movie about (among other things) an anti-establishment presidential candidate? ... Palin at the Tea Party ConventionSeattle Times Sarah Palin: Talking to the handUSA Today What Do You Think of a Palin Presidency in 2012?ABC News AFP -Kansas City Star -WIBW all 2,653 news articles » Publ.Date : Mon, 08 Feb 2010 22:10:17 GMT+00:00 East Coast, California Dig Out After Weekend Storms - ABC News Reuters East Coast, California Dig Out After Weekend Storms ABC News Americans at both ends of the country spent today digging out and cleaning up from punishing storms over the weekend. Thousands gather in Washington's Dupont Circle for epic snowball fight. ... More Winter Weather Eyes CarolinasWHNS Winter Storm Warning: 6 to 8 inches of snow expectedGalesburg Register-Mail DC region braces for up to 20 more inches of snowWashington Examiner 14WFIE.com -News Channel 7 -Easton Courier all 2,483 news articles » Publ.Date : Mon, 08 Feb 2010 22:32:01 GMT+00:00 Quinn: Ill. lt. governor hopefuls should speak up - Washington Post Washington Post Quinn: Ill. lt. governor hopefuls should speak up Washington Post AP CHICAGO -- Democrats in Illinois are getting a political do-over: the chance to pick a new lieutenant governor nominee themselves now that the primary winner dropped out of the race because of revelations about his checkered past. ... Candidates already lining up to replace Lt. Gov. nomineeBloomington Pantagraph Illinois looking for lt. governor hopefulsSeattle Post Intelligencer Scott Lee Cohen bows out of Illinois lieutenant governor raceChristian Science Monitor Peoria Journal Star -Chicago Public Radio -Chicago Tribune (blog) all 390 news articles » Publ.Date : Mon, 08 Feb 2010 22:25:41 GMT+00:00 Decision time for Ukraine's Tymoshenko - BBC News BBC News Decision time for Ukraine's Tymoshenko BBC News Will she or won't she pursue her political ambitions through the courts or in protest action on the streets? It is not often that the woman with the famous golden braid, whose glamour permeated the Orange Revolution five years ago, ... Tymoshenko under pressure to concedeTimes Online New Ukraine leader may still drive hard bargain on gasReuters Yanukovych set to become president as observers say Ukraine election was fairThe Guardian Wall Street Journal -New York Times (blog) -The Hindu all 2,875 news articles » Publ.Date : Mon, 08 Feb 2010 22:12:05 GMT+00:00 Victims' Remains Removed From Explosion Site - Hartford Courant Times Online Victims' Remains Removed From Explosion Site Hartford Courant If you were affected by the Middletown explosion or know someone who was, please contact us at breakingnews@courant.com. MIDDLETOWN - A van carrying the remains those killed in an explosion Sunday at Kleen Energy left the plant about 1:45 pm Monday, ... Toll of Plant Blast Confirmed at FiveWall Street Journal REFILED-UPDATE 1-Workers accounted for at Connecticut blastReuters It can't happen here? Deadly power plant explosion on the Connecticutvtdigger.org WBZ -WITN -The Trentonian all 3,109 news articles » Publ.Date : Mon, 08 Feb 2010 20:59:07 GMT+00:00 Rep. John Murtha Dies at 77 - Wall Street Journal Washington Post Rep. John Murtha Dies at 77 Wall Street Journal WASHINGTON—Rep. John Murtha of Pennsylvania, a powerful and controversial force in congressional spending on defense, died Monday at age 77. The former Marine and Vietnam War veteran reigned for two decades as the ... Rep. John Murtha dies at 77CNN John Murtha dead at 77Kansas City Star Rep. John Murtha, Iraq war critic, dies at 77WBT Lebanon Daily News -TV Guide all 944 news articles » Publ.Date : Mon, 08 Feb 2010 21:35:52 GMT+00:00 Obama's Health Care Summit: Just for Show? - ABC News MiamiHerald.com Obama's Health Care Summit: Just for Show? ABC News Just for show? Chances slim for health care deal at Obama's summit with GOP _ but 'not zero' By RICARDO ALONSO-ZALDIVAR Associated Press Writer The Associated Press President Barack Obama delivers remarks at the Democratic National Committee Winter ... Obama's healthcare summit sets stage for end-gameReuters Expectations Low For Obama's Health Care SummitNPR Republicans skeptical on Obama health summitAFP USA Today -Christian Science Monitor -Sacramento Bee all 2,573 news articles » Publ.Date : Mon, 08 Feb 2010 22:07:03 GMT+00:00 RSS Software Backlinks

10 Ways To Protect Your Financial Identity Being Used For Someone Else?s Shopping Spree

Someone impersonating you could be spending your hard-earned money.Impossible! Not... Read More

Restore Your Credit Rating And Reduce Your Debts

Your credit rating affects many areas of your life. Opening... Read More

Why Consumers Need a Nationwide Credit Freeze NOW

What do a shoe retailer, an online discount broker, and... Read More

The Easy Way To Gain Access To Your Free Online Credit Report

When you apply for credit, those lending you the money... Read More

Identity Theft ? Monitor Your Credit Report

The recent security breach at credit card processor CardSystems Solutions... Read More

5 Ways To Prevent Credit Card Late Fees

Paying a credit card late fee is the same as... Read More

Credit Help for Real Estate Financing: Five Categories of Your Credit Score

1. Payment History -- 35%The number of accounts paid as... Read More

Credit Card Debt: How To Control It

A lot of people spend more money than they can... Read More

What is Credit Card and Debit Card Blocking?

Have you ever been told you were over your credit... Read More

Protect Yourself Against Identity Theft

Identity theft is when someone uses, without permission, your personal... Read More

Top 5 Reasons To Check Your Credit Report Regularly

#1 Make sure mistakes aren't hurting your credit.Reviewing your credit... Read More

The Right Way To Credit Repair

If you have a bad credit rating, then you might... Read More

Collection Agencies: What Do They Do?

Collection agencies are businesses that collect past-due bills and accounts... Read More

Credit Repair: How To Deal With Your Creditors

If you are in danger of credit problems because you... Read More

Tackling Bad Credit

The first time I heard the term credit history was... Read More

Credit Card Is Adding The Silver Lining To Your Pocket

In the new millennium plastic money or credit cards has... Read More

ChexSystems: Who They Are and How it Affects You

ChexSystems is a company that maintains a subscriber membership service... Read More

Making Sense of the Information in Your Credit Report

If you've ever applied for a credit card or loan,... Read More

How to Evaluate and Raise Your Credit Score

Why do some people get offers for pre-approved credit cards... Read More

A No-Brainer Way Of Getting Credit And Credit Cards

What Is Your Credit Rating Now?If you have any charge... Read More

Free Credit Reports: From The 3 Major Credit Bureaus!

Get your credit report online for FREE. Many financial advisors... Read More

5 Steps You Can Take to Get Paid!

There are always some companies that have past due invoices... Read More

Myths and Truth about Credit Scoring

Credit score is the key factor determining approval of almost... Read More

Identity Theft - Dont Think You Are Immune

As identity theft becomes more prevalent, the need to regularly... Read More

Choosing the Right Credit Counseling Agency for You ? Some Tips Part 2

Credit counseling companies come in all shapes and sizes. Whether... Read More