Credit Card Minimum Monthly Payment

How is the credit card minimum monthly payment calculated?
 
    
The typical monthly minimum payment is 1 to 3 percent of the balance. However, last year, credit card companies have doubled their credit card minimum monthly payment rates from a typical 2% to 4%. The banks that increased theirs include Chase, Bank of America, and Citibank. At first glance, you’ll think of it as bad news. However, if you consider the length of time you need to pay-off a credit card bill by only making minimum payments, this is good news to you. A higher credit card minimum monthly payment rate would mean that you’ll need less time to pay-off your credit card debt even if it means higher bills to settle each month.

However, make sure to understand how the credit card company defines credit card minimum monthly payment in your agreement. Any time you pay less than your credit card monthly minimum payment, your card issuer will consider your payment late. This is actually how credit card companies obtain large chunks of interest on a lot of credit card accounts. So, before paying off what you think is the credit card monthly minimum payment, check the terms of agreement at the back of your card. Even if the minimum payment is expressed in a percent rate, most credit card companies have a minimum credit card monthly minimum payment. You may calculate your monthly minimum payment rate to be $2 but the company only accepts a minimum of $5. This could lead them to charge a late payment fee, adjust your interest rate, have collectors call you, charge-off your card, or report you as a delinquent cardholder to the credit bureau.

Thanks to the Credit Card Act of 2009, credit card companies are now required to disclose a cardholder’s credit card monthly minimum payment on his/her credit card account. Under the new law, a credit card bill should disclose the time you need to pay off your balance. The bill should also show the exact figure that you need to send every month in order to pay the card balance in three years. A credit card minimum monthly payment warning is also required of card issuers in order for consumers to be aware that they may increase interest and issue a longer pay-off period if consumers only pay the credit card minimum monthly payment.

These new rules will raise the awareness of cardholders on how credit card companies operate and how they sometimes take advantage of consumer ignorance. This way, they will be more conscious of the dangers of missing dues and only paying the credit card minimum monthly payment.

Source: Credit Cards For People With Bad Credit Rating

 Print this page   |     Bookmark this page