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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