Credit card minimums not doubling but might still hurt
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Credit Card Minimums: A Real Concern for Cardholders
Regulatory pressure is mounting on credit card companies to ensure cardholders pay off more of their debt each month. While it's unlikely that minimum payments will double, the increase could still pose a significant challenge to those already struggling financially, potentially pushing some towards bankruptcy or alternatives like debt settlement.
Executives from Debt Shield, Inc., a Maryland-based debt settlement firm, highlight that while it's being reported that minimum payments are doubling from 2% to 4% of the outstanding balance, the actual changes are more nuanced. According to Mark Baylis, President of Debt Shield, new regulations mandate that minimum payments must cover all interest and fees, plus 1% of the balance. This will result in more substantial payment increases for high-interest accounts.
To illustrate, a cardholder with a $10,000 balance at an 18% Annual Percentage Rate (APR) currently pays $200 under the 2% minimum payment rule. Of this, $150 goes toward interest, leaving only $50 for the balance. With the new rules, at least $100 must apply to the balance, pushing the minimum payment to $250.
Although the average APR is just under 14%, late payments can hike it to 27% or more. This change disproportionately affects low- to medium-income families, who find it harder to avoid late fees. Even small increases in monthly payments can have severe consequences for these families, who are already dealing with inflation and stagnant wages.
For instance, an 18% APR results in a $50 increase in minimum payment, while a 27% APR leads to a $75 jump. The 27% rate also means an additional $75 in monthly interest. These examples underscore the crippling impact of high-interest rates on financially vulnerable cardholders.
In the long run, increased minimum payments could reduce overall debt levels, Baylis notes. However, he also suggests that credit card companies could better support consumers by lowering excessively high interest rates.
About Debt Shield, Inc.
Debt Shield, Inc., specializes in debt settlement, offering consumers a way to resolve unsecured debt through negotiated lump-sum settlements. By providing alternatives to bankruptcy, Debt Shield serves both debtors and creditors. For more information, call 1-888-397-7546 or visit [www.debtshield.com](http://www.debtshield.com/?=mmp).
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