The Awful Truth About Credit Card Payments

Credit card bills arriving in consumers' mailboxes this month will have a little something extra – extra information, that is. Thanks to the new federal rules that took effect Monday, card companies must now clearly show consumers how long it will take for them to pay off their balances if they make only the minimum payments. Card statements must also show how much a consumer would have to pay each month to zero their total balance within three years.

But at least one major bank has let its customers -- at least those who diligently searched its Web site -- in on the importance of making more than your minimum credit card payment long before Congress approved the new rules last year. A page on the Web site for North Carolina-based BB&T, which the bank says has been up since late 2008, includes an article dedicated to encouraging consumers to make more than their minimum monthly card payments along with examples of balances and payment schedules. (See the page here.)

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Credit card companies, the article notes, make minimum payments "low enough to … seem attractive" and adds that "[p]aying more than the monthly minimum will eliminate the balance much faster, save you considerable interest charges, and provide some peace of mind knowing you are taking a prudent action."

Coming from a bank, that sort of advice is "more than unusual," said credit card expert Curtis Arnold. "It's unheard of."

To understand why this is remarkable, remember that banks and credit card companies derive much of their revenue from charging interest rates on revolving balances – that is, balances that consumers carry over from month to month instead of paying in full. The longer a consumer takes to pay off a balance, the more interest they pay. It's why card companies have famously labeled those who pay their balances in full each month as "deadbeats" – they may be among card companies' least profitable customers.

Consumer-Friendly Reputation

BB&T, the country's 17th largest bank according to 2009 data from the Federal Reserve, issues one consumer credit card as well as business credit cards. By encouraging customers to pay more of their balances sooner, experts say the bank was, at least in the short run, promoting behavior that was against its best interests.

BB&T says it's all about educating its consumers.

"One of our goals is to make our clients' financial dreams come true so to speak and the way to do that is to provide them with the best financial education we can give them," said spokeswoman Merrie Tolbert. The importance of exceeding minimum payments and other advice on the BB&T Web site, she said, is "paramount for our clients to understand what they need to do in order to be financially savvy."

Credit card industry watchers say that if any banks were going to be this forthcoming with consumers, it makes sense that BB&T would be one of them.

"I applaud them for being so honest -- that's kind of BB&T's reputation," said John Ulzheimer, the president of consumer education for the Web site Credit.com. "Even though they're a big bank, they do have more of a consumer-focused reputation anyway."

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