Credit card minimum payments on the rise
This is good news for consumers who stick to a minimum payment schedule.
Creditcards.com surveyed the top ten credit card issuers and has found the days of really low minimum payments may be over. That would be good news for consumers who never pay more than their minimums, because it would eliminate their debt faster and actually save them money on added interest charges.
“Of the 10 credit card issuers we surveyed in June 2014, two set $15 as the minimum dollar amount payment; one charges $20; four charge $25; one charges $30; and two charge $35,” CreditCards.com reports. The survey goes on to say that the last major issuer to carry a $10 minimum, recently implemented an increase that bumped their minimum to $25.
Why the change?
In the past, issuers have been criticized for keeping minimum payment limits low in order to maximize profits. As a result, consumers were kept in “near-perpetual debt.” By increasing their minimum payment limits, consumers would get out of debt faster.
Still, why would creditors make a change like this that would hurt their profits? Consider that every month a consumer remains in debt gives the creditor another opportunity to charge interest. It’s really in the creditor’s best interest to have lower payments, so what’s with the increase?
“I think this move helps the creditors on two fronts,” points out Gary Herman, President of Consolidated Credit. “Helping their clients manage credit card debt more effectively means fewer accounts go into default – which is just as bad for the creditor as it is for the consumer. In addition, making increases themselves now might help them avoid regulation to move the minimums up in the future.”
Should consumers rely on minimum payments standards?
This doesn’t mean that you should just be satisfied making the minimum payments on all of your credit cards. You should still aim to pay more when your budget allows for it, because the faster you pay off debt, the less time you’ll spend in debt and the less money you’ll end up spending on adding interest charges.
“You should never be satisfied just making minimum payments,” Herman reiterates. “There is no reason to stay in debt and keep a credit card balance from month to month. In fact, in an ideal world, you should aim to eliminate your credit card debt completely at the end of every month. If you can’t pay it off completely, then you should always pay off as much as possible.”
If you’re not satisfied following the payment schedule your creditors set for you, we can help. Consolidated Credit offers a free debt calculator that allows you to see the impact of adding a little extra toward your minimum payments OR moving to a fixed payment schedule. This useful tool can help you develop the right payoff strategy for your budget.