Elections Today
- Pennsylvania
Recent Projections
| State | Candidate | Delegates |
|---|---|---|
 Donald Trump | ||
Pennsylvania |  Joe Biden |
Mellody Hobson: Credit Card Minimum Payments Set to Rise
July 20, 2005 — -- More than 115 million Americans carry monthly credit card debt. And if you're among those paying off a high balance, you may have an unpleasant surprise in next month's bill: a higher minimum payment.
"Good Morning America" Financial Correspondent Mellody Hobson discussed why payments are going up and what you can do about it.
The Office of the Comptroller of the Currency, a bureau of the U.S. Treasury Department as well as a watchdog to protect consumers from abusive and deceptive credit card practices, is cracking down with tougher guidelines on interest rates, marketing tactics and account management practices. According to BusinessWeek, credit card companies had a banner year in 2004, bringing in record profits of $30 billion, in large part due to fees and high balances.
In response to the OCC's call to credit card issuers to help their customers get out from the layers of debt, many national banks and credit card issuers are increasing their monthly payment requirements. For the millions of Americans struggling to pay off their credit cards, the mandated jump in monthly minimum payments may seem a bitter pill to swallow.
However, the change in requirements could just prove to be the best medicine in terms of helping consumers dig their way out of debt. The typical monthly minimum will double from about 2 percent to 4 percent. Under the change, minimum credit card payments will cover not only fees and interest charges, but more importantly, a portion of the original debt. This means that customers paying off their credit card bills should be able to make a dent in their debt and actually pay it off more quickly.
When does the change take effect?
If your credit card company has not already put the new guidelines into effect, most likely you can count on paying a bigger monthly minimum sometime within the next year.
Bank of America has already enacted an increase, and Citigroup, Discover Card and MBNA plan to follow suit. Together, these credit card issuers account for about 40 percent of the 658 million general purpose credit cards out there.
