Credit card companies had been extremely pressured by federal regulators to raise the current minimum credit card payments from 2% to 4% of total outstanding balances. Regulators argue that such a move would help consumers get out of debt faster, thereby reducing their overall interest fees.
According to the Federal Reserve, 40% of Americans pay off their credit card balances in full each month, with the other 60% barely able to make minimum payments. Experts argue that raising minimum amounts would be good for consumers, but not good for the economy or the financial system as a whole.
How the New Regulation Benefits Credit Card Users
The credit industry is patterned in such a way that allows its consumers to spend above what they earn. This spending method leads to a higher debt risk for Americans, and statistics prove the point. Statistics from the Federal Reserve Bank of New York show that this methodology leads to higher debt ratios.
According to credit industry experts, the average household owes more than $10,000 in credit card debt alone or a total of $2,500 in credit card debt. Customers will pay a minimum of $200(per 2% in minimum payment) a month for the next 33 years.
Adapting to the New Regulations
Nearly all consumers can add extra cash to their minimum credit card payments, and most consumers already work two jobs and overtime to pay their bills, according to the National Consumer Financial Protection Bureau. While the new rules appear harsh for the average consumer, who already has high debt, consumers will benefit from paying off debt earlier and with less interest in payments. Consumers who have difficulty making ends meet may be able to free up funds by following a well-prepared personal budget.
If a customer cannot meet the excessive minimum payment, it is best to contact a creditor immediately and explain the situation. Most lenders will temporarily reduce your interest charges and may even eliminate all outstanding late payment fees or other fees. They will also reduce the interest and waive certain outstanding fees.
The new rules will force credit card companies to play a greater role in helping consumers overcome their debt problems by being more assertive. Federal regulators believed that increasing the minimum amount would help consumers break out of an endless cycle of debt, and they believe that it would reduce credit card debt for consumers. Many experts argue that forcing people to pay inflated minimum wages will further damage their financial well-being – namely, their livelihoods.
Customers who are often late in making payments should seek professional help from a personal finance expert. We have created a service to provide consumers who currently have high debt and interest rates with a low-cost and low-interest credit card payment solution. Credit counselors can combine the debt at a low monthly rate, reducing or even eliminating the debt and interest charges.