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Credit card minimum payments increase, but your salary isn’t. What to do?
The major credit card companies have recently increased their minimum monthly payments from 2% of the balance due to 4% of the outstanding balance. This came at the urging of Congress in response to complaints that it can take decades to pay off a credit card balance if the consumer pays only the minimum amounts. With the revised schedule, years can be taken off of the time it takes to repay, along with thousands of dollars in interest. This would seem to be good for consumers.
The problem, as many have noted, is that the average household has nearly $10,000 in credit card debt and is already paying the minimum out of necessity. No one chooses to carry credit card debt for decades, but sometimes it works out that way, often due to unexpected unemployment. Job hunting has been difficult for the last five years or so, and many people have been forced to put household expenses on their credit cards in order to make ends meet. They’ve gotten by, but the doubling of the minimum, which is all many people are able to pay, can be crushing, and could force thousands of people into credit counseling, debt management plans or bankruptcy. Worse, it could drive unsuspecting consumers towards those debt negotiation programs often advertised on late night television.
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