Don’t even bring bankruptcy into it
I’ve been reading about the new rules on credit card minimum payments, and I’m a little confused. Is it now that the minimum payment of 4% of the balance is required by law? Or is it that the credit card companies are now allowed to force you to pay that much (after having been at 1.5-2% for years)?
I heard a story on Marketplace yesterday about someone whose minimum payment went to 5% — and he contacted his card company and complained and still has to pay the 5%, but he also got a lower interest rate. What are the chances of that happening to most people?
Sure, sure, people shouldn’t carry balances if they want to be fiscally responsible (blah, blah, blah). But you know in Finance and Accounting classes, you’re drilled on the utility of Leverage. So even if we force people to take finance courses, their basic idea of using loans and credit as a way to leverage your cash will be reinforced.
And yes, the people affected by this will be forced (forced!) to pay lower interest over the life of their account if they stop spending. But what do you want to bet that many of these same people miss a payment, or sometimes don’t pay the minimum? And what happens then? Their interest rates go up, and they pay extra fees to the bank — both of which increases their minimum payments. Funny thing, isn’t it? You sure don’t hear the banks complaining about this potential loss of interest, do you?
