Credit Card Reform Makes It Easier To Pay Down Your Balance: Center For Responsible Lending

[babylonsister]

http://www.huffingtonpost.com/2010/05/06/credit-card-reform-makes_n_566617.html

Arthur Delaney
Credit Card Reform Makes It Easier To Pay Down Your Balance: Center For Responsible Lending


The credit card reform that took effect this year can save big money for cardholders who pay more than their minimum account balance -- as much as $2 for every $1 paid above the minimum, according to the Center for Responsible Lending.

That's all there is to it: Pay more than the minimum balance and potentially, you could save big because your payment will be applied to the debt with the highest interest rate instead of to the debt with the lowest interest rate. The new payment allocation order, along with an end to arbitrary rate hikes and an opt-in requirement for overdraft charges, was one of the central components of the Credit CARD Act, which Obama signed into law in 2009 and which took effect this year.

"The way payments are allocated now you can benefit -- but only if you pay more than minimum balance," said CRL researcher Joshua Frank. "If you pay the minimum payment, you don't get any benefit from the payment allocation now."

Paying more than the monthly minimum has been a good idea since forever, of course. But now it's an even better idea.

Frank said CRL analyzed several hypothetical credit-card debt scenarios for its analysis. A common scenario has a credit card holder with one balance for purchases and another for cash advances, which carry a higher interest rate. Because payment will now be applied to the more expensive debt, paying $100 above the monthly minimum saves this borrower $224 over the life of the loan.

CRL warns that consumers will have to be vigilant about these things, as credit card companies will find ways to fudge the law.

[Baalath]

1. I like how it tells what it costs to just pay the minimum

on each of the bills

[flpoljunkie]

3. It's really mind blowing to see it spelled out in black and white.

[flpoljunkie]

2. It's staggering to see how long it would take to pay off balances with minimum payments, as well as

how much interest they will pay in the process. People who cannot afford to pay off their month balances are a huge boon for the credit card companies--as you can see from the example below.

With a minimum payment of $15 on a balance of $1321, it would take 10 years to pay this amount off and you would pay a total of $1950! These figures represent an annual interest rate of only 8.95%.

With a payments of $41.95 per month, it would take 3 years to pay off the $1321 and you would pay a total of $1511!

And, yet, will Bernie Sanders credit card usury amendment, limiting the rate to 15%, even get a vote in the Senate?

[ClarkUSA]

4. Looks like all the naysayers who dissed Obama's credit card reform are unrec'ing again.

Happy to rec and :kick:

[and-justice-for-all]

5. I wish I could say this has been a benefit to me..

but it has not.

For example, I have one credit card which was used to buy new windows for the house, that had a minimum payment prior to this bill going into effect of 358.00. After the bill went into effect, that same credit card minimum payment increased to 458.00.

I would not mind that so much if I was not unemployed. I do not have any more more funds I can apply to this card either.

[tridim]

6. Last year I was paying a few bucks more than minimum on a $300 balance

And CHASE decided to raise my minimum payment for no reason (I asked and they had no reason).

Since I was paying electronically I didn't know about it until about 6 months later, now my "balance" is well above $1000 due to penalties assessed for no reason.

Now that I'm broke and jobless the balance just keeps going up. Nothing I can do about it. If they hadn't raised my payment it would have been paid off a year ago.

Fuck you Chase. Fuck you with a long, hot, steel rod.