4 ways to fight minimum payment increases

In the past month, thousands of credit card customers have been surprised by news that their minimum payments will more than double -- in some cases, creating a credit card payment as big as a mortgage.

Irate consumers gathered on online credit card forums to compare situations after the largest credit card issuer in the country, JP Morgan Chase, notified certain cardholders that their minimum payments will increase from 2 percent of the total balance to 5 percent starting in August. Chase cited new federal credit card legislation passed in May that will force card issuers to change some practices. The law sharply restricts the card issuers' ability to raise rates without cause, but does not bar increases in minimum payments.

"Along with the pressures of the economy, issuers have to figure out how to comply with the new rules, and they're doing some experimenting," says Peter Garuccio, spokesman for the American Bankers Association. "People have gotten very used to the convenience of having credit cards in their wallets, and it's easy to forget that these are loans -- unsecured loans."

On some forums, Chase customers complained of monthly payments set to increase from $300 to $750 or more. "This is a great way to raise people's interest rates by killing them on the monthly payment," wrote one forum participant.

The difference 3 percent makes
Use the calculator below to see the difference between a 2 percent and 5 percent minimum payment with varying APRs and balances.


To see how your specific balance and payments would be affected by a change in minimum payments, use our Minimum payment calculator
Consumer advocates expressed mixed opinions about the move. The increase will help some cardholders pay off their balances more quickly, consumer advocates say, but the size and timing of the increase will cause problems for consumers who are already struggling. "If you can't make the payment, you're either late or in default," says Linda Sherry, director of national priorities for the nonprofit advocacy group Consumer Action.

Chase would not provide many specifics or reveal how the company decided which customers would face the increase. "When making a decision to change terms, we look at the history of the whole account," Chase spokeswoman Stephanie Jacobson stated in an e-mail. "This may include usage on the account, balances and the APRs available on the account, and payment frequency or size. The way customers use and maintain an account helps us determine what changes to make in order to protect our customers and our company."

However, reports from consumers and discussions on online credit forums indicate that many affected customers had, in the past, taken advantage of a Chase offer for a balance transfer with a low interest rate -- typically less than 5 percent -- for the life of the transfer. Many reported that they had been paying on the balance for more than two years and had not made additional purchases that would be subject to higher interest rates.

That was the case for Sande Donahue, a retired paper company manager from Chicago, who manages her finances meticulously and believes Chase wants to renege on the deal it gave her about three years ago for 2.99 percent interest for the life of a balance transfer. Her minimum payment on the card will jump to $488 a month. Donahue has two more cards with Chase, including another low-interest balance transfer, and she's waiting for a second notice. "They're the ones who made this deal, and they should stick to it," Donahue says. "There are a lot of people who wouldn't be able to afford this."


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The Pros And Cons Of Debt Consolidation

When you take a loan to reimburse your all other loans then it is effectively called debt consolidation. Mostly, it is simple each time to pay one single loan with a fixed or low interest rate rather than paying many loans with different charges. Many people have debts like mortgage, credit card debt even at times they have a second mortgage to refund. It becomes very difficult for a person to handle three different loans and its payments with various rates of interests. It is much more easier to pay only one single loan.

You can make a plan and take a secured debt and refund your all other unsecured debts. For a secured debt, they generally ask for the house but you may also get it in favor of any of your assets. When you are taking loan against an asset it will offer you a low rate of interest in contrast to an unsecured debt. So many people take loans in favor of their assets to recover their financial condition as well as they can trim down the net sum that they have to give to the creditors. The total amount, which they have to give to the creditors, will decrease if the rate of interest is lesser.

You can also avail the online debt consolidation. The site of debt consolidation in the Internet has been largely accepted because here one can keep the monetary facts secured as well as secret. You can have several debt and loan calculators online who are there for helping out people in the process of loan consolidation.

While you are applying online, they will need certain things like age proof, address proof, and valid income proof. In the Internet, the debt collectors will give you much more information in comparison to other debt collectors.

Though debt consolidation is undoubtedly a better option but sometimes there are limitations. If you are sure enough that you will be able to refund the particular loan each month in time, then only you can opt for debt consolidation. If you are taking a secured loan and you fail to pay the money then you may have to lose your house, the lender often locks the asset and you may lose a substantial possession. Therefore, it is better that until you are very sure to be able to make payments of the secured loan, don?t go for debt consolidation.

You can take the help of a tax consultant or a debt consolidation group if you have any doubts about anything. They can assist you to make a decision that will be ideal for your economic status. Even the lenders can tell you about a professional who will be able to guide you in the whole procedure. In such cases, the lenders are also very supportive and so they settle down the debt and the rate of interest.

Probably this should be the last option and one must not do it regularly. One can restrict debts just like credit cards by spending cautiously. You will very rare need a debt consolidation if you can evade debts instantly.


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