Minimum credit card payments may be on the rise
Consumer advocates are warning that lenders’ minimum credit card payments may be on the rise, as a result of recent revenue loss by banks.
Some lenders, including JP Morgan Chase and Bank of America, have increased minimum payments for borrowers, with the goal of raising late fee income.
Under the Credit Card Accountability, Responsibility and Disclosure Act, late penalties are restricted to $25 or the minimum payment account, Dow Jones Newswires says. However, by raising minimum payments card issuers can increase late fees.
“Rising minimum payments can cause borrowers to default and help generate greater fee income for issuers,” Victor Stango, an associate economist with the Federal Reserve, told Dow Jones.
Reports suggest some banks have raised monthly payments by as much as 2 percent, even on customers who have a good payment history, the news source says. Bank of America says its new fees are based on account balances, late fees and finance charges, not individual borrowers.
The recent rise has attracted the attention of the Federal Reserve, which on October 19 announced preliminary proposals to limit the charges.