I have some good news and some bad news for you…..

Good News

Many of the credit card companies are going to be increasing the minimum monthly payment for cardholders.

Bad News

Many of the credit card companies are going to be increasing the minimum monthly payment for cardholders.

What????  

Actually, both statements are true.  The truth is that many Americans have shown themselves to be spenders and huge abusers of credit cards.  I see it, I want it, I have a credit card that has room to spend, and I have it.  The government mandated that something be done to “encourage” people to get out of debt.  So….

By the end of the year 2006, all credit card companies are required to make changes to reduce the time in which credit card charges will be paid off.  They could have reduced the interest rate they were charging, instead many of them have increased the minimum monthly payment.  Some banks have doubled the minimum payment.  If you can afford the increase in payment, it will definitely allow you to get out of debt much sooner. 

f you borrowed $5,000.00 on a credit card and made the minimum monthly payment at 16%, it would take more than 30 years to pay off the $5,000.00.  By the same token, if you borrowed the same $5,000.00 and made double the minimum payment, even at 18% interest, it would be paid off in less than 10 years.

However, if you can’t afford the higher payments, you are indeed in a pickle.  If you are living paycheck to paycheck and are barely able to make the minimum monthly payment, what can you do?  Is it a coincidence that the law concerning bankruptcy and the law requiring increased minimum monthly credit card payments happened at the same time?   I think not.

For many years I have counseled my clients who had a lot of credit card debt to refinance their home, pay off the credit cards, and then cut up the credit cards.  This is generally good advice as interest on a home loan is generally tax deductible, and credit card interest is not.  This is excellent advice unless the cycle begins again, and they end up with higher mortgage payment, AND credit card debt.

If you don’t have a home, it is advisable to make a list of all of your credit cards, make whatever the minimum monthly payment is, with the exception of the one that has the highest interest rate.  On the highest interest rate card, pay more than the minimum every month.  When that one is paid off, pick the next card and do the same, making the highest monthly payment you can.

If you have a home, you should look into refinancing and see if that will work for you.  This should only be considered if you have decided to stop living on credit.  If you are not yet ready to make that decision, then follow the advice for those that do not have a home.

I am Rita Marie of Mortgage City.  I know from where I speak and write.  Please call me and let me try and help you.  (623) 935-4664  Ext 236  Cell 480-529-7310