Credit card minimum monthly payments

Changes In Required Credit Card Minimum Monthly Payments

By Sharon Secor

Direct Lending Solutions Staff Writer

Recently, the new credit card minimum monthly payment guidelines set forth by the Office of the Comptroller of Currency came into effect. The original directive was given in January 2003, and gave banks and credit card companies three years to come into compliance. As of January 2006, the changes were in effect throughout the nation. This has had a significant effect on many of those who are carrying credit card debt. However, there are strategies that can be used to mitigate the effects of the credit card minimum monthly payment policy change.

The Office of the Comptroller of the Currency is responsible for regulating banks and credit card companies. In January of 2003, concerned about the degree of credit card debt in the nation, the OCC issued directives intended to resolve this, allowing three years for banks and credit card companies to implement the changes. As of January 2006, the average credit card holder faced a monthly minimum payment of double what they had been accustomed to paying, as the minimum payment generally rose from 2 percent of the total debt to 4 percent.

Some credit card holders took a double hit, as the OCC directives had an unintended effect. The new credit card minimum monthly payment regulations were aimed at paying down credit card debt faster. However, borrowers paying faster cut into the profit margin, or the money that some banks and credit card companies made on the interest payments they received from the longer loan period. This, in turn, caused some banks and credit card companies to raise their interest rates, in addition to increasing the credit card minimum monthly payment. So, many credit card holders faced significantly increased interest rates in addition to a higher minimum monthly payment.

Fortunately, there are steps that the average credit card holder can take to ease the difficulties brought on by these changes. First, if facing both the mandated increase in the credit card monthly minimum payments and a raised interest rate, try to address the interest rate increase. Many have had success in simply calling the credit card company or the bank, via the telephone number on the back of the credit card, and asking for a reduction of the interest rate. A surprising number of banks and credit card companies have been willing to make compromises, as they realize that can mean the difference between a borrower paying the debt or defaulting.

The next step that those holding credit card debt can do is try to reduce their monthly expenditures by an amount equal to the increase of the credit card minimum monthly payment. At first glance, it may seem much more difficult than it really is. There are a variety of little things that can be done, ranging from grocery shopping on the way home from work, rather than spending the gas money on a separate trip, to taking a lunch from home a few times a week to avoid spending the extra money, to using a library card to borrow movies from the library, instead of renting them.

Shaving the household budget here and there can make up the difference, or at least a good portion of it, in many cases. For those with a financial situation that is a bit more complex, there are other options. These include professional credit counseling, debt consolidation or taking a lower interest home equity loan to pay off the higher interest credit card debt.

While there are many who have been negatively affected by the new credit card minimum monthly payment mandates, with thought and planning the new financial strains can be managed. The important thing is, if the increased credit card minimum monthly payment is causing fiscal hardship, not to let the situation get out of control without taking action to resolve it.