Credit Card Minimums - The Freepers Interpretation

[Winston702]

Found this gem: What a laugh!!!!!

I was over on the left side of websites and continually read how they are bemoaning the increase in minimum payments from 2% to 4% of the balance.

Now since a larger payment is being made, more is going towards principle, and will reduce the length of the "loan." Now if the length of the loan is less, such that less total interest is paid. Therfore, the card company makes less total "profit" from the "loan"

If someone has a credit card payment calculator, could you run the following numbers and post the results:

Credit balance: $9,000
Interest Rate: 18%
Min Payment: 2% and 4%

I ran it myself - Google is my friend

2% minimum - 93 months to payoff
4% minimum - 32 months to payoff

Credit companies are missing 61 months of interest payments.

So how in the hell do those at DU think this is a windfall for the credit companies???

More research - Total Interest paid - Same $9,000

2% minimum - $7760
4% minimum - $2365

Your Savings = $5395
Card Company Loss = $5395

[NMDemDist2]

1. that sounds correct to me, the lawmakers added that proviso because

at current minimum payments, the CC industry kept people in debt for decades!

while it is a painful transition for many families, that was one of the few things Congress did that the CC companies didn't like :evilgrin:

they (the CC co.) would have rather left the payment schedules the same

[fishwax]

14. i disagree (though I agree)

It's much better for people to pay higher percentages, if they can afford to.

If they can't afford to, though, they will just put more money back on the card each month.

I seriously doubt this proviso will decrease credit card debt, though I'd love to be pleasantly surprised.

[frankly_fedup2]

22. I'm like you; however, I found it interesting that the one credit card

my husband and I have only used, increased our credit limit by $3,000.00 this past Christmas and sent me all kinds of checks to transfer funds from other credit cards, for shopping, etc.

I wonder if Abramoff lobbied for these companies? Hmmmmm, makes one stop and think??? I know the government doesn't give a rat's ass about those who have over extended themselves and I am sure they are out there. I wonder how much the different credit card companies paid toward their campaigns?

If people can afford it, it does save money, and will get them out of debt and, hopefully, we will all learn a lesson regarding credit cards . . . pay them off and never get anymore again. Say Bah Bye to the credit card companies. It's hard to do for a house or a new car; however, there are equity loans through the bank; and speaking of banks and their new charges, well, that is for another day.

We were already making double payments on ours, so it will not affect us. Also, a friend who is an accountant told us that if we paid $50 extra a month on our mortgage, we will move our payoff date up about 10 years. I'm not good with numbers so don't ask me how he came about this; however, he does our taxes, is a CPA at my husband's company he works with. However, my son and his wife and new baby may have a hard time just as my parents who are retired and in their late 70's. If they cannot pay it, after a lifetime of hard work and saving to have a certain amount of money coming in every month to live comfortably and by a budget, they have one credit card they use and had it within their budget, then the Congress slaps them in the face and says they have no choice anymore. Notice how the government decides pretty much anymore what we do? The government will tell you how you will pay your bills as well as tell you that if you get into some kind of financial dire straits, that's your problem. However, that same government is into corporate welfare big time. It reeks.

I had a thread a day or two ago where my father, 77-years-old, called me upset about it. We've fixed it so it gets paid, which is the best thing, but my father doesn't need this aggravation. He has worked his life, saved for retirement, and gets a SS check monthly. But they pay at least $320 a month for Medicare plus a secondary insurance. Then my dad's meds are over $500 a month. They own their home (Mortgage paid in full) as well as their vehicles. They have their living expenses and might take a vacation with all of us once a year to the beach. Yeah, their pension and SS retirement gets them by; however, they planned ahead for the pension. Good thing too. They would have never made it just on SS Retirement. My husband and I have 401K's with 10% of our gross coming out. When we retire, we want to do more than just get by. Plus, who knows if the thieves in Washington will continue to rob us from what we are putting in SS now for our parents as well as our children are paying into SS for us. They are guaranteed a pension. Why can't they guarantee one for us. After all, it is still our money, right?

I just don't like the way that Congress changed the Bankruptcy laws for the people; however, large corporations do not fall under the same guidelines. The majority made sure of this before they voted on the credit cards.

This is going to be their end result (especially for folks who are unable to pay 4%). There will be yet another down swing with the economy. Then we can say again, "It's the economy stupid."

I Can't wait to hear Bush's next speech where he tells everyone to "Go Shopping." . . . wait, he already did that after 9/11. That was the answer after 9/11 per this pathetic excuse for leadership.

You're doubling peoples payments on some bills you brainless, fetal-alcohol-looking idiot. If he had ever had to pay a bill in his life rather then run to daddy, maybe he could comprehend how REAL people live. The majority of us WORK for our livings. This man has no work ethic and as president he still doesn't. He's in Washington 3 days a week, then he and Peaches Bush head back to Mindless land in TX for four days. Oh yeah, on Air Force One, so that is on our dime as well. :grr: :rant:

[Lochloosa]

45. Capital One right?

Just asking...because I got the same 3000 in "checks"

[frankly_fedup2]

46. Yep. So they weren't trying to get you in more debt either, huh?

I'm glad I didn't have to use it to buy anything . . . I tore up the checks too.

[dogfacedboy]

56. Capital One sends me those checks EVERY month.

They are constantly trying to give me more credit. To be honest, though, Capital One has worked with me on some things. All I had to do was ask, and they dropped my interst and annual fees. I don't use the cards that I have with them very often, and I know that CC companies don't like that. I have 2 cards with them, and rarely have a balance, between the 2 cards, of more than $100.00.
I learned my lessons about credit the hard way, with a lot of "help" from who I'm proud to call my EX wife!

[regnaD kciN]

48. What is significant (and ominous) about this change...

...is that it decouples minimums from the interest rate.

We should be clear -- the change is not "from 2% to 4%," as has been widely reported. The change is from a flat 2% to a new formula of "1% of the balance plus any interest."

This was brought about because CC companies were raising their interest rates to a point where the minimum payment wouldn't even cover interest, let alone reduce the principal (which would happen if the APR is over 24%).

Now, with the formula being a percentage of the balance plus interest charges, the CC companies have no reason to keep their rates even at that inflated a level. I would look for rates to go sky-high, into the 30%-35% range, especially for those who already are carrying sizeable balances. This means that the effective "minimum payment" could easily go to 5% of the balance or higher...with all but 1% of that going as pure profit for the finance companies.

The result wouldn't be the consumer being "forced" to pay off their balance significantly faster. (Under this formula, even if the consumer never charged another penny, it would still take 100 months, or 8 1/3 years, to pay off their balance.) It only makes it easier for the finance companies to charge what used to be considered usurious interest throughout those 8 1/3 years.

[jbnow]

26. It wasn't congress

or part of the bankruptcy bill. It was federal banking regulators guidelines issued to the credit card companies.

Congress still did nothing right.

This is for the better in the long run. However people who had a lot of debt and a tight budget could get hurt especially since it is happening at the same time gas and heat are rising so much.

People should not have such debt but they got into it with an understanding of how much they would have to pay. I'm not sure it should apply to existing debt. If they can't afford the doubled payment and their rate jumps to 30% they are in big trouble. .

[frankly_fedup2]

35. Well, why did this happen AFTER the Congress passed the bankruptcy

bill? I find that kind of interesting myself, of course, I am a conspiracy believer (sometimes) myself though. :tinfoilhat:

[SPKrazy]

2. Hate to say it, but they are right! n/t

[fishwax]

13. only assuming they don't keep using the credit cards n/t

[SoCalDem]

29. Problem is this..

If you are stretched to the limit paying 3% now (wich is OVER the old minimum), and now you have to pay more, and you don't have it, you are likely to make a few late payments which will result in ramping up your interest rates..

The "rosy scenario" only works if you cut up the cards, and pay them off..


These companies have psychologists on staff who "help" them work these details out.. They know human nature.. The first time you need a car repair, you WILL use your card, because most people don't have an extra 800-900 dollars laying around to pay for the repairs.

[SPKrazy]

34. No doubt about it

I was referring to the mathematics in the OP

On edit, they may hire Psychologists to figure this out, but I can tell you it doesn't take a psychologist to figure that out!

[Balbus]

3. I don't get the joke...

Seems about right to me, also.

[Coyote_Bandit]

4. Delete

[LoZoccolo]

5. Yes, that makes sense.

It's not a benefit to the credit card companies. If it was, they could have raised the payments themselves without being subjected to the lending guidance; it was certainly within their ability to.

The only thing I think is unfair is that people used the credit when they thought the payment would be lower and now are stuck with it; I think maybe the old debt should be grandfathered in, with new debt subject to the new rules. It's still a good idea to pay it off with higher payments, though.

[sendero]

37. Exactly...

.... that is how I would have done it. Or perhaps, made it default to 4%, but if you requested that your previous balance be subject to only 2%, the cc company would have to grant it.

But that would have been a software nightmare for them, it's no surprise it doesn't work that way...

[Chimichurri]

6. what about raising interest rates at the same time

now that they have access to your other bills, ie. utilities and say you forgot to pay or were a few days late on it, they can use that as fodder to raise your interest rate to 30% or higher. Wouldn't it be this unfair practice that they end up making up for those losses?

[Winston702]

8. This was already done prior to this change

[wakeme2008]

7. Plus they have reading problems

I do not remember anybody on DU saying that the higher min payments were good for the CC companies. But I could be wrong...

[Maine-ah]

9. they are right, but what about interest rates going up

to make up for that? I've got one at 30% because of a late payment.

[frankly_fedup2]

49. Holy mother of God. That's those little paragraphs they put in that

little pamphlet they send with the card and/or on the back of the application. Sorry to hear that. Will it go down in 6 months if you do not make anymore late payments?

[undeterred]

10. The MSM has presented this as if CC companies were doing the

consumer a big favor, helping them get out of debt faster.

The reality is, many people will have to pay twice as much each month and will probably keep using the card and running it back up again. If they can't pay on time they will get an even higher rate.

Its not a favor to people who can only afford a minimum payment, it just makes them dig in even deeper.

[fishwax]

16. Exactly

people who are scraping by on minimum payments will just wind up putting new expenses on the card.

[Frank Cannon]

27. Absolutely right. In the Bush economy, the CC companies...

have us by the short and curlies. EVERYONE involved in passing that CC legislation knew that this would make all of us "little people" more indentured to them.

Again, my advice is to terminate ALL relationships with credit card companies. Whatever it takes, arrange alternate secured financing or sell ALL of your crap on e-Bay--just do SOMETHING to cut up those cards, pay the credit card companies off, and reduce or entirely eliminate your unsecured debt.

I have a feeling that the nonsense from CC companies is going to get even WORSE now that they're finding that they've cut their own throats. Just about everyone I know with half a brain is doing everything they can to free themselves of credit card debt. Credit card companies used to make a king's ransom off of people making small minimum payments and stringing their debt out through decades, but those days are gone.

[frankly_fedup2]

50. I'm with you on that one. We only have one card, but that is one

too many. Has CSPAN had anyone on to discuss this? I usually watch every morning and I remember one of them reading about this but I do not think it was the main topic.

Also, here it is less then a month after Christmas, and NOW is the time for it to take effect.

[DIKB]

11. My view on it

was that coupled with the new bankruptcy bill, that heavily favors credit card companies, w/o any raise in wages, and the mean income being so stagnant: People will have to choose between essentials and paying bills, many won't be able to juggle it all. Will we have a wave of new debtor prisons ?

What the credit card companies got out of this, didn't even factor in. Though I did think it highly hypocritical for the government to be running the highest deficit in HISTORY while trying to force people to be more fiscally responsible. * has borrowed more money than ALL previous presidents COMBINED.

[enki23]

12. and charge outrageous penalties if you fail to make the new payment

.

[KittyWampus]

15. Higher Monthy CC Payment= Less $ To Pay Utilities/Health/Food/Rent/

Car payments. So if you're on a tight budget, you're screwed.

Same salary but now you have to make a CC payment that has doubled... and if you miss it or are late, your interest rate will skyrocket.

IMO, the only people this new increase "helps" are those who've just gotten their FIRST card. Those who've already got a balance might be in deep trouble.

[fishwax]

17. yep, i agree crying shame

it certainly won't encourage more fiscal responsibility.

Suppose you spend 200 bucks in cash a month on groceries w/o putting any on your card, while barely scraping together 100 bucks for minimum payments. Then your minimum payment jumps to 200 bucks. Great. Instead of paying 200 cash for your groceries, you pay 100 cash and 100 credit. Net gain = 0. The only change is it makes it even MORE difficult for people to simply cut up the cards.

[salin]

18. Since you posted this, I am interested in your take

on the freeper post.

[Winston702]

32. Since you posted to my post, what are your thoughts?

I think it's all a sad joke that will cause many people pain.

[salin]

36. the post itself

per the interest rates seems to make sense. Odd though that the post directly smacks DU, but in an odd way, given I can't recall a single thread that fits what is described by the freeper. So I think the post/thread is odd - and am not sure what the point of posting it is.

I do think paying more of the balance is good - as folks were getting into a perpetual debt cycle where the interest was growing out of proportion to the original debt. However I fear that many will initially find the whole thing painful if it is not already in their budget.

The much bigger issue in the law (and it isn't a stand alone law - it is part of the bankruptcy law) are the lack of mitigating factors/exceptions for filing bankruptcy (eg medical emergency, natural disaster, etc.), I think that the lack of addressing the industries predatory lending practices is a shame - frankly if a business takes on a big risk (bad creditor) then they ought to work that into their business plan rather than use govt as their 'hedge' (power of govt to enforce repayment, that is). I am much more concerned about these issues than the provision increasing the mandated minimum payment.

[Lefty48197]

19. CC banks are often charging 15-20% and even more

in annual interest charges. This used to be called loan-sharking, now it's called "business as usual" in Bushmerica.

[Greyhound]

21. Let's be fair (we're not freepers after all). This is one thing that is no

*'s fault. It was saint raygun, the dim, that removed the restraints on interest rates they can charge.

[frankly_fedup2]

51. Isn't he the only president that is second to only Bush for having

the worst economy ever?

[Greyhound]

57. Since his administration started the whole strategy of changing

the numbers when you don't like what they tell us, it is hard to say. Proponents from both sides have their talking points, so it will depend on whom you talk to. My personal experience tells me that the raygun economy sucked green donkey dicks, but your average financial adviser will get all misty eyed and nostalgic when talking about the raygun economy. :eyes: :shrug:

[yurbud]

20. It's nice to see the Freepers are concerned about CREDIT CARD COMPANIES

They all have credit cards at these insane rates of interest too.

You would think they'd be asking why congress didn't fix that, whichever party is responsible for the legislation.

[hopeisaplace]

23. I know - it's unbelievable to hear their defense

of the credit card industry.

Makes me conclude that there are only 2 very rich corporate fat
cats posting on freeperville - that's the only thing that makes
sense..:crazy: :crazy:

[Frank Cannon]

24. 4% my ass, the CC cos have NO restrictions on min payments!

My wife got a bill last month from a CC company with a 30% MINIMUM payment. It was absolutely outrageous. It was like they WANTED us to make sure we paid off the whole balance as soon as possible. In my experience, that's NEVER happened before, so it's almost like they know something that we don't.

Anyway, we found alternate financing and paid those crazy freaks off. My advice to anyone these days would be to kill ALL of your unsecured credit as soon as possible, and NEVER re-up with a credit card company again. If you don't have the money to buy something (or to save for it on a timely basis), you simply can't afford it.

The credit card companies got HUGELY greedy with that latest legislation that they got through the corrupt Congress. It will, within a short time, finish them. Good riddance to bad rubbish.

[Little Star]

25. This government walks like the mob, talks like the mob,

must be just like the mob. CC companies are figuring out how to charge interest rates that equal or exceed mob rates! This late payment thing that increases your interest rate is totally criminal.

[frankly_fedup2]

30. There is a car dealer in a town about a 40-minute drive from where

we live. They are selling brand new cars to newly married, uneducated (didn't go to college) young adults. The kids think they are getting great buys.

These loan sharks (and that is the way credit cards are anymore as well), give these kids low payments but (take a deep breath before reading what I'm going to type next because it's going to take your breath away), they are charging them anywhere from 29% to 32% interest on 7-year loans. Oh yeah, the dealership is the "finance company."

The kids have not matured enough to stop and think about buying something and if you can really afford it. They are major impulse buyers.

Now that should be illegal. Why didn't they make the credit card companies stick to an interest rate that is reasonable.

The sneaky tricks of Credit Cards from Hell:

A lot of people do not read the small print on the "Cash Advances" interest charges (like my dad). The credit card company will get your attention with the 0% interest the first 6 months. Then it will go up to, on average 9-12%. Then there is those little explanations of increased interest, and if you are not careful, they will get you good.

Most cash advances interest rates average from 16-21% interest. That's some of that small print.

Also, two late payments within a 6-month time period, they can increase your interest rate up to 19-21% for 6 months, then as long as no payments are late during the next 6-month period, some will drop it back down; others state that your interest rate will stay at the high rate. Even though, you may have been late and paid a $30 late fee, you must be punished as well.

Then, this one should be illegal because they speak about doing this on the little flyer that has the letters so close together you can hardly read, but really do not tell you what they can do with the information.

ALL credit cards will have a little information about how they will run "random" credit checks with your new credit card account. These credit checks are random alright . . . randomly everyone that has an account with them will have their credit checked every three months. If ANYTHING shows up that is bad (even if you are fighting another creditor in court and it has not been resolved; however, the creditor has hurt your credit rating on your credit report), this new credit card company will increase your interest up to 20-29%. How can they do it? Because they said they were going to run a credit check on you every three months, and when you signed that you agreed to the terms, well you signed that you understood the terms . . . didn't you?

I hope everyone, especially on DU, can boycott ANY AND ALL credit cards, just pay off what we have. I know everyone's financial situations vary, and believe me, my husband and I have been in some bad ones, but those of us who can, we should boycott. I've seen when 80,000+ are members here. Wouldn't that make a statement if we got our friends, family, and neighbors to join us? Just throwing an idea out there.

I hope everyone, if they can, not get anymore credit cards. When you get a ton in the mail, write HELL NO on the little thing that is postage paid by the credit card companies, and mail it back. I've been doing it for the past year and it's liberating in a way. Plus, it's costing them 80 cents in total in mail to and from.

[Little Star]

38. Bingo!!!! n/t

[frankly_fedup2]

31. Quack --- Quack (nt)

[ieoeja]

28. Unless the rate is 0%.

I had one card with a 12-month at 0% introductory offer. It's the only credit card debt I have, and I was happily making that $10 monthly minimum while renovating an apartment. The apartment will be ready and (hopefully) occupied by the time they start charging me interest providing the extra income I needed to pay it off.

Now I have to pay close to $200 a month on the darn thing while I haven't any rental income.

[michiganbuckeye1970]

33. what this new regulation really does...

For a vast majority of people, credit card minimum dues will not change. What the new reg by the OCC mandates is that Credit Card companies prevent negative amortization on accounts. Strictly speaking, after your monthly payment is made, your balance must have decreased. In a large majority of instances this currently happens. However, for those individuals who are getting overlimit fees and late fees combined with a penalty pricing interest rate (24% or higher), they will get hit with a higher min pay. Which really means that if they do not make the higher min pay, they will receive more late fees, overlimit fees and finance charges. The new reg only helps those who can afford to make the higher min pays...For people who are being crushed by fees and high finance charges, it does no good really, because they cannot afford to make any payments.

[salin]

39. good post

welcome to DU!

Interesting nic - bet that gets you both a lot of friends and... er... ;-)

[newyawker99]

41. Hi michiganbuckeye1970!!

Welcome to DU!! :toast:

[Hosnon]

40. Benefits the CC companies in that they may get more money on an

individual card before Bankruptcy is filed.

[Marie26]

42. That's actually right

These changes are supported by consumer rights groups & anti-credit card activists. By raising the minimum payment, it forces consumers to pay off the balance quicker & prevents the credit card companies from racking up tons of interest. Right now, the minimum payment is so low, it often doesn't even pay off the interest - so people dutifully pay every month without realizing the amount they owe is actually going up. This is a benefit to consumers, as I suspect you know. The credit cards actually fought this reform tooth & nail. What Freeper site did you read this at?

[enki23]

43. oh, by the way. you always had the option to make those higher payments

.

[me b zola]

44. What an odd post

So does this post come with a link, or is it your original work? :shrug:

[BlackVelvet04]

47. According to consumer affairs

"Using the two percent minimum balance calculation, this person would have a required monthly payment of approximately $203.16. Under new requirements, the monthly payment would be $258.33 ($158.33 in interest, plus $100 of the outstanding balance). This is a difference of roughly $55 – on a balance and interest rate that exceeds what the average consumer is carrying. Most credit card customers will have much smaller minimum payment increases, if any, he said."

http://www.consumeraffairs.com/news04/2005/occ_credit_card_minimum.html

[frankly_fedup2]

52. What is the URL for your post? Is it on Freak Republic? N/t

[Marie26]

53. I think he wrote it himself.

Why he's pretending it's from Free Republic, I don't know. :shrug: There's nothing wrong with that post, he's actually laid out very well how this reform can help consumers.

[Marie26]

54. dupe. nt

[cap]

55. windfall to CC company because

50% of their losses occur with the first couple years of the loan. This helps them in the time of the recession. The Credit Card Companies have done the math... Trust me.. they werent thinking of us.