Released: February 05, 2006

Credit card minimums go up

Source: By Rodd Clayton, Lincoln Journal Star

[Note from Consumer Action: Few consumers will see their minimum payments “double,” as stated in this article, but many cardholders, especially those who carry large balances, may see steep increases in minimum payments on their credit cards.]

Consumers will pay more now, so they don’t pay less forever. We’ve all seen the statistics: it could take dozens of years to pay off a credit card balance by just sending in the minimum each month.

Most credit card issuers, following guidance from federal regulators, are increasing minimum monthly payments on outstanding balances, with the aim of decreasing the life span of a debt.

The guidelines were put in place by the Office of the Comptroller of the Currency and the Federal Reserve, to address concerns that banks were extending loans to people who’d never be able to pay them off, thus jeopardizing the banks’ soundness.

“Everybody knew this was coming,” said Linda Sherry, director of national priorities for Consumer Action, a San Francisco consumer advocacy group. “Nobody knew how banks would follow it.”

Sherry said some consumers are going to be “blindsided” by the new guidance.

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