This article came in my Dollar Stretcher email newsletter today

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I don't think they'll mind I post it in it's entirety since the link is for a for profit "debt relief" site. That being said the article raises some interesting issues.

Look for things to get tough for lots of "regular" Americans real soon.


A Storm Is Coming...
by Greg Moore
Credit card payment crisis looms

What would you do if your required minimum monthly payments on each of your credit cards doubled without your charging a cent more?

For example, suppose you owe $10,000 on a card and your required minimum payment is 2% of your balance or $200. What would you do if your required minimum payment ballooned to $400?

Reduce retirement savings?
Increase the debt on your home?
Decrease your standard of living?
Panic?

Twelve months from now this will be a desperate reality for thousands of credit card holders making minimum payments. According to "Business Week," April 25 edition, a rule change by the Office of the Comptroller of the Currency <http://www.occ.treas.gov/ftp/bulletin/2003-1a.doc> first introduced in January of 2003 is now being strictly enforced, requiring credit-card companies to increase required minimum monthly payments over the next 12 months.

Today, typical required minimum monthly payments are 2% of the balance. Some credit-card companies require as little as 1% of the balance. In 12 months, typical required minimum monthly payments will double to 4% of the balance!

This rule change is an attempt to eliminate Black Holes, also called negative amortization, where payments don't cover at least the interest due. It's also an attempt to assure at least some of the principal is paid with each minimum credit card payment.

Although well intentioned, a noose is tightening...

Inflation is accelerating...

"Soaring energy costs helped drive the U.S. Consumer Price Index up in March by 0.6 percent, the sharpest monthly gain since October." -- USA Today

...taking a bigger bite out of paychecks leaving little room
to absorb payment increases.

Paychecks are getting smaller...

"Wages for average worker fell in 2004, after adjusting for inflation, first such drop in nearly decade." -- N.Y. Times

...so we can't count on bigger paychecks to make these payments.

If you think bankruptcy will provide some relief, think again. A new bankruptcy bill has been signed into law making it tougher for heavily indebted Americans to wipe out their obligations.

Look for a cascade of financial pain for many Americans about 12 months from now...

Credit card minimum payments increase, which leads to missed payments, creating late fees and higher interest rates, which decreases FICO score, triggering Universal Default clauses on other credit cards causing their interest rates to skyrocket, and more missed payments, and so on. And not even bankruptcy will guarantee escape.

The only guaranteed way to avoid this disaster is to start today with a systematic plan to pay off all debt, but especially your credit card debt, as fast as possible. Even paying off 1 or 2 cards will create some cushion to absorb increases 12 months from now.

The first warning shot was fired back in January 2003. You
have a 12-month window of opportunity. Take it. _____________________

Greg Moore is the Architect of the Wealth Building System, 'DebtIntoWealth -- Lessons from My Journey to Debt Freedom' providing knowledge, tools, and support to families seeking to escape conventional financial wisdom in order to save their financial lives. Visit http://www.debtintowealth.com/stretcher.html

[Warpy]

1. I keep telling people to get rid of those things

any way they can. Not only will the minimums go up, so will the interest, both without your permission, both ugly surprises sprung on you when you can least afford them.

Even if you're paying off that monthly balance now, what makes you think that your job won't disappear or that you won't get sick? That's what people with those debts thought, too, and now they're stuck for the rest of their lives.

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2. yup, I don't have any credit card debt any more and will have the

last of the "other" stuff paid off by summer's end (if the creek don't rise)

Leaves my mortgage and I have lots of equity so if I really hit a bad spot I could sell the house fast.

[AX10]

3. Don't have too many credit cards.

That's my say.

[Robert Oak]

4. new bankruptcy law

I don't know when it goes into effect, but anyone with outrageous
credit card debt...do it NOW before the law comes into effect.

They are squeezing and squeezing the middle class and this debt
lifestyle is not sustainable.

Anyway to get rid of those credit cards, do it.

You can get other types of loans as well as just use your debit
card for monthly expenses.

The credit card companies have managed to roll back 100+ years
of law making loan sharking illegal and now they have made it impossible
to get out from under.