WARNING! Raising the Minimum CC Payments... - Chicagoland Sportbikes
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post #1 of 36 (permalink) Old 12-02-2005, 03:14 PM Thread Starter
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WARNING! Raising the Minimum CC Payments...

From here...
http://credit.about.com/od/creditand...s/a/051805.htm

WARNING! Raising the Minimum Payment

Though I applaud raising CC minimum payment, I cannot help but be angry.
Minimum payment on credit cards is being raised! It is raising from the existing 2% of the outstanding balance to 4%. Is raising minimum payment good news or bad news? It depends on which side of the credit card balance you are sitting. This issue will be more thoroughly discussed below but I cannot resist inserting a few comments to begin the discussion of raising credit card minimum payments.


GUIDE COMMENTARY
Though I applaud the credit card minimum payment increase, I cannot help but chastise the credit industry and Comptroller of the Currency (OCC) for the timing. I believe there is far too much coincidence that the new bankruptcy law just happens to occur at the same time as raising minimum payment rates. Allow me to ellaborate:

Bank of America was the first to raise minimum payments in the second quarter of 2004. I praise their efforts because I think their move was oriented towards consumer benefit. Their charge-offs for bad loans sky rocketed to 63% ($691 million).
The new bankruptcy law will be in affect October 2005 and the credit industry is keeping the rise of minimum credit card payments as quiet as possible.
This is BIG, BIG NEWS! Yet except by accident, have you heard any major announcement about raising minimum payments? Did you see it blaring on the primary news channels? Your credit card payment just doubled. Isn't that newsworthy?. Don't you think this should be shouted from the house top? But instead it is spoken of in whispers... until the new bankruptcy plan is neatly in place. Coincidence? I don't think so.
And why has it been so "unannounced"? First of all it is very unpopular with the industry's "best customers"... those are the ones so deep into credit card debt that they cannot see the top. Secondly, bottom line profit loss is at stake if these "best customers" can more easily declare bankruptcy and have this debt written off before the new law takes affect.
Now I will get off my soap box.


THE GOOD NEWS
In a 1999 article, Balance Transfer and Consolidation, is the following: "[Examine a] minimum payment based upon a $5000 balance and a 17% interest rate. By increasing the minimum payment from 1.67% to 3% the total interest paid is reduced from over $25,000 to just over $4000.... the amount of time to pay this debt off is reduced from 81 years to 18 years.

Similarly, an interest rate of 13.5% but a minimum payment of 1.67% will cost you $9538 in interest and take 41 years to pay off. On the other hand, a higher interest rate of 19.8% but a minimum payment of 3% will cost you only $5858 in interest and take only 21 years to payoff.

So you can see often times interest rates have far less affect than the amount of minimum payment. For this reason I applaud the new standard that is on its way in.

According to the business week article Tough Love For Debtors: "most banks and credit-card issuers will ratchet up required minimum monthly payments over the next 12 months or so. In the future, the payments must cover all fees and interest and pay down at least some of the outstanding borrowing.... So far, BofA, Citigroup (C ), Discover Card (MWD ), and MBNA (KRB ) -- which together issue some 275 million of the 658 million general purpose cards in circulation -- are among those with timetables for raising their minimums. JPMorgan Chase (JPM ), with roughly 96 million cards, will 'experiment' with higher minimums later this year on a 'small portion' of its customers.... "


THE BAD NEWS
There is no bad news if you are like the other 109 million credit card holders who pay off their balance monthly or at least pay more than the minimum. However if you are like the 35 million who only pay the minimum... WATCH OUT! Your payment will soon (if not already) double from 2% up to a possible 4% of the balance. See Minimum Payments On The Rise.

But I would be hesitant to be angry with this, though. As it happens, before the credit industry greed dropped the minimum monthly payment to 2%, it use to be 5%. Why the OCC permitted this drop, I will never know. But I am guessing like the bankruptcy law, it was caused by significant pressure from the credit card industry.

Who says money can't buy government... though at least now the OCC is trying to correct itself. You may wish to correct your errors as well by applying any extra money possible to paying down your credit card before th minimum payment is raised.

Consider this: higher minimum payments rid balances much faster and save $$$ on interest. A $10,000 balance at 18% would require about 58 years to pay off and cost $28,930.64 in interest at the 2% minimum payment rate. If the minimum payment were 4%, it would take 15 years to pay off and cost $5,915.67 in interest... a savings of over $23,000.

Get out of the credit card trap! I encourage you to read the article I wrote on this subject when first starting out over 8 years ago: Credit Cards... They're Just Like Drugs.

Ron Hix
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post #2 of 36 (permalink) Old 12-02-2005, 03:18 PM
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Quote:
Consider this: higher minimum payments rid balances much faster and save $$$ on interest. A $10,000 balance at 18% would require about 58 years to pay off and cost $28,930.64 in interest at the 2% minimum payment rate. If the minimum payment were 4%, it would take 15 years to pay off and cost $5,915.67 in interest... a savings of over $23,000.

whoa! I'm glad I'm not in that boat!

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post #3 of 36 (permalink) Old 12-02-2005, 03:21 PM Thread Starter
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Quote:
Originally Posted by Sticky
whoa! I'm glad I'm not in that boat!
Amen, brother. I have ZERO credit card debt.

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post #4 of 36 (permalink) Old 12-02-2005, 03:36 PM
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Quote:
Originally Posted by ronhix
Amen, brother. I have ZERO credit card debt.
Then you haven't done enough track days or got enough bikes!
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post #5 of 36 (permalink) Old 12-02-2005, 03:38 PM
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Quote:
Originally Posted by Jack
Then you haven't done enough track days or got enough bikes!
LOL, when I raced I gave my CCs a heavy workout! Waaaay beyond my means...

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post #6 of 36 (permalink) Old 12-02-2005, 03:40 PM
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It's bad that they're being sneaky about it, but holding that debt is always risky. Plus, for no reason except that they want to they can change your terms. Read any change in terms notices closely cause my wife has one card that they just nearly doubled the rates. This is not a penalty rate; they just changed their terms.

-Mike
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post #7 of 36 (permalink) Old 12-02-2005, 03:44 PM
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And that, Gentlemen, is why I'm not racing as an Expert!

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post #8 of 36 (permalink) Old 12-02-2005, 03:51 PM
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Expert, pfft. For me that was just from startup cost as a slow as hell newb. yellow plater. I couldn't even imagine the coin I'd have to cough up to run a focused attempt making all the races and such....insane.

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post #9 of 36 (permalink) Old 12-02-2005, 04:04 PM
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Yeah, I get the feeling I'll be hearing my family bitch about this. My credit card use is limited to online, travel, and when I lose my debit card (about once every couple years). I don't use my debit card online, the rules concerning what you owe if stolen vary between debit and credit cards. I **think** it's $500 for debit but only $50 for credit.

I don't race/track on the credit cards. If I can't afford, I don't go. My military duties keep me away from at least 2 races a year, so travelling all over chasing points isn't worth it for me.

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post #10 of 36 (permalink) Old 12-02-2005, 04:16 PM
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Raise it to 100% minimum payment as far as I am concerned. Or change the max charge repayment time to 90 or 180 days. Credit Cards are far too abussed on our society today.

I am with Ron, I have no credit cards, and have not had any for years. Debit Card is the way to go. Cash works great as well. Plan and save, significantly reduced stress comes with it.

JMHO,

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post #11 of 36 (permalink) Old 12-02-2005, 04:18 PM
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I have had a CC since 18. In 12+ years, I have never not paid in full. Each month I try to pay as many bills on my CC as possible. This way I earn cash back and points towards goods.

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post #12 of 36 (permalink) Old 12-02-2005, 04:57 PM
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Pffffit...

They might as well have substituted my name in there. Despite best intentions I was a little "indulgent" with cards back in the day. I haven't used one in 8+ years, yet they still get checks from me each month.

Worst part is I realized that I don't have anything to show for it. It's one thing to get over your head for say - new motorcycles. It's another thing to go into debt over bar tabs.

Ouch.


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post #13 of 36 (permalink) Old 12-02-2005, 05:00 PM
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Quote:
Originally Posted by Underdog
Worst part is I realized that I don't have anything to show for it. It's one thing to get over your head for say - new motorcycles. It's another thing to go into debt over bar tabs.

Ouch.

Been there, done that, now we know.

"For John came neither eating nor drinking, and they say, 'He has a demon.' The Son of Man came eating and drinking, and they say, 'Here is a glutton and a drunkard..."

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post #14 of 36 (permalink) Old 12-02-2005, 05:02 PM
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Quote:
Originally Posted by ronhix
Amen, brother. I have ZERO credit card debt.
Amen to that. Have never carried a CC bill to the next month..never will. Its all discipline

Mike

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post #15 of 36 (permalink) Old 12-02-2005, 05:08 PM
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I have a lot of CC debt from paying off my car and from paying for a friend's funeral. I don't have a problem with paying a higher min payment.

My name is JB, people call me JB

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post #16 of 36 (permalink) Old 12-02-2005, 05:14 PM
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Quote:
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Amen to that. Have never carried a CC bill to the next month..never will. Its all discipline
I have carried a balance a couple times, but not often and never more than a month or two. I have CCs but 99% of the time pay them off when I get the bill.

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post #17 of 36 (permalink) Old 12-02-2005, 05:35 PM
 
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i hate to say it but i have a lot of credit card debt. funny part is, i didnt have any prior to meeting my wife??? no joke. i would pay off my balance in full every time i got the bill. then i slipped. went down hill and have been trying, unsuccessfully to get out.

i fucking hate credit cards. all i want to do is get back to cash. cash is king.
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post #18 of 36 (permalink) Old 12-02-2005, 06:23 PM
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Quote:
Originally Posted by Hawkeye
i hate to say it but i have a lot of credit card debt. funny part is, i didnt have any prior to meeting my wife??? no joke. i would pay off my balance in full every time i got the bill. then i slipped. went down hill and have been trying, unsuccessfully to get out.

i fucking hate credit cards. all i want to do is get back to cash. cash is king.
Been there.....took a long time to get out. I have no intentions of going back.

Every day I think about helping you out....you know what I mean.

This is gonna hurt!
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post #19 of 36 (permalink) Old 12-02-2005, 06:47 PM
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I have had the following saying pasted onto the bottom of my computer screen for about 10 years:

"Don't ever run out of cash. And remember, cash ain't cash unless it's cash."

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Great Quote - One would think that the Secret Service was smart enough to get serviced secretly.

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post #20 of 36 (permalink) Old 12-02-2005, 06:49 PM
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Quote:
Originally Posted by Wink
I have had the following saying pasted onto the bottom of my computer screen for about 10 years:

"Don't ever run out of cash. And remember, cash ain't cash unless it's cash."
Sounds like you're in my line of work, snappin' necks for money.

"For John came neither eating nor drinking, and they say, 'He has a demon.' The Son of Man came eating and drinking, and they say, 'Here is a glutton and a drunkard..."

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post #21 of 36 (permalink) Old 12-02-2005, 07:33 PM
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I think it is great. By raising the minimum overspenders will reach their threshold for repayment faster, so they won't get in the hole as deep. Regardless the reason why the CC companies are doing it it will work out better for everybody.

By the way, I use my CC for everything I can, I rarely carry more than a few bucks in cash. No debit card, they are evil. My CC balance is around $40.00 and gets paid off every paycheck or faster. Works wonders to stay on top of your finances when you do it almost daily.

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post #22 of 36 (permalink) Old 12-02-2005, 11:19 PM
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I think it is a good thing.

For thsoe that only use cash. WARNING. You are not building your credit history. wait till you need to buy a car or a house or get a something for credit.

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post #23 of 36 (permalink) Old 12-03-2005, 12:22 AM
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Cougar is right. I have a house, and many paid as agreed loans, and have had many credit cards. When starting out, you need to have a credit card and use it a little bit. It is unfortunate that debit cards don't show your consistency and reliability to the reporting agencies... but it is the truth nonetheless.

Still, I avoid debt like the plague. The only thing that I might ever need credit for is a house. And since I am on my third house now, not having credit cards won't effect my ability to buy a house.

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post #24 of 36 (permalink) Old 12-03-2005, 08:04 AM
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Do unsecured loans really help your credit history Which credit credit debt is, an unsecured loan, even my 19 year old son, without a job can get a credit card, I really don't think making minimum payments on credit cards actual help your credit score. Does anyone know for sure?

As for carrying a balance on your credit card and making minimum payments, that's just nuts. If you can't pay them off every cycle, your living beyond your means and you'll be caught in a debt for a long, long time.

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post #25 of 36 (permalink) Old 12-03-2005, 08:40 AM
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Quote:
Originally Posted by RickC1957
Do unsecured loans really help your credit history Which credit credit debt is, an unsecured loan, even my 19 year old son, without a job can get a credit card, I really don't think making minimum payments on credit cards actual help your credit score. Does anyone know for sure?
Yes, and I know for sure. Having a credit card, carrying a balance, and making regular payments will definately help your credit score. What helps your score even more is making regular payments over a long period of time.

I messed up my credit in college, typical right? It took 7-8 years to rebuild it. The first step I did was pay off the bad debt. The second step I made was get a credit card, use it a little, and make regular payments. That built my score up some where I could get a car loan, which built it up more so now I am buying my first house.

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post #26 of 36 (permalink) Old 12-03-2005, 10:03 AM
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Quote:
Originally Posted by Underdog
Pffffit...

They might as well have substituted my name in there. Despite best intentions I was a little "indulgent" with cards back in the day. I haven't used one in 8+ years, yet they still get checks from me each month.

Worst part is I realized that I don't have anything to show for it. It's one thing to get over your head for say - new motorcycles. It's another thing to go into debt over bar tabs.

Ouch.

Dude I was soooo right there with ya, I did the same thing. I thik I paid for the addition on Walter paytons home with my bar tabs at Americas bar back in the day. And it all would always go on my cards. It took a long time but i finnally got out from all of it. Now I still have one card that I use, but it doesnt get out of control. plus I get Harley cash with it for chrome and shit

You need to buy a house out here int he suburbs, sit for a year , take out a home equity loan, pay off the debt, then sell the house the next year, the appreciation alone shoudl whip you debt away




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post #27 of 36 (permalink) Old 12-03-2005, 10:47 AM
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Aside from certain strategic purchases ( house, car ) pay cash or do without.

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post #28 of 36 (permalink) Old 12-03-2005, 11:15 AM
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Quote:
Originally Posted by RickC1957
Do unsecured loans really help your credit history Which credit credit debt is, an unsecured loan, even my 19 year old son, without a job can get a credit card, I really don't think making minimum payments on credit cards actual help your credit score. Does anyone know for sure?

As for carrying a balance on your credit card and making minimum payments, that's just nuts. If you can't pay them off every cycle, your living beyond your means and you'll be caught in a debt for a long, long time.
Any payments on any line or loan over a long period of time will improve your credit rating. Things that will hurt your credit rating,

- Too much credit card debt or maxed out cards
- Too many inquires for credit without getting approved, aka denials
- High percentage of revolving debt to limits

Credit cards are like crack... People abuse them and the CC companies target kids while they are in College before they know better.

I work for a bank and encounter cc abuse quite a bit. This has a little to do with our culture, people don't accept responsibility for their actions. If you bought it, you have to pay for it sooner or later. If you can't afford it now, what makes you think you can later. The only reasons to use credit card,

0% Teaser.. You know you can pay for it before the promotion is up

Miles/Cash Back - You have the cash but want to earn some free stuff

Short Term - You know you can pay it off with that bonus at the end of the month

No Choice - Sometimes people are in a bind and have no choice, lost job, medical, ect...

Most people I encounter file BK for the wrong reasons. Trying out do their neighbors with the BMW, 500k house... ect.. I'm happy they have changed the BK laws. We all end of paying for idiots like that..




"I am Jack's smirking revenge.."

Last edited by CHI1000RR; 12-03-2005 at 11:28 AM.
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post #29 of 36 (permalink) Old 12-03-2005, 11:49 PM
Clever Girl
 
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Location: Glendale Heights
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I had a good system going before this year. I'm in college, so I would charge stuff to my CCs all the time. Then, over the summer, I would work in the quarry in Algonquin as a laborer making the big money, and pay off the cards. Then go to school the next year, and when I ran out of savings, put stuff on the cards. Go to work the next summer, make money, pay them off...

Well, I screwed myself last summer because I had to stay and take summer courses. Now I have debt that I'm trying to pay off, but making minumum wage, it is taking a long time. I rarely use mine now, just when I'm in a bind and don't have money. Oh well, at least I don't have student loans to pay off after school.
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post #30 of 36 (permalink) Old 12-04-2005, 12:16 AM
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Then you haven't done enough track days or got enough bikes!
Jack, You may not have seen Ron's van. Anyone that drives that daily deserves to be debt free!

Chris
NESBA CR #51
'06 GSXR 600 / '05 CRF250X / '04 CRF 230 / '05 CRF 88
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