LANGLEY AIR FORCE BASE, Virginia –
If you’re only paying the minimum on your credit card every month, it’s time to adjust your budget.
Credit card companies are planning to increase the minimum monthly payment this year to cover all fees, interest and at least one percent of the principle every month.
The change comes as pressure is being applied to credit card companies by federal regulators concerned by the number of Americans getting into debt and staying there.
Brett Noll, Langley Federal Credit Union chief marketing officer, said many credit card users only pay the minimum.
“There has been pressure from regulators to raise the minimum payment because people are only paying the minimum,” he said. “When you pay the minimum, it takes a long time to pay off the debt.”
He added that credit card companies are being proactive by raising their minimum payments before the government tells them to.
In many instances, the minimum is going to double, said Suzie Markel, Family Support Center lead work life consultant.
“They currently take two percent of the unpaid balance,” she explained. “They’re moving up to four percent. It could mean that you’re payment is going to double.”
Ms. Markel said the move to raise the minimum may sound bad now, but is actually a good thing.
“The upside is that you’re going to get your debt paid off faster,” she said.
Currently, the two percent minimum payment only pays the interest and fees, keeping people in debt longer. The four percent payment rate will include paying one percent of the actual debt.
Paying a two percent minimum, it takes someone who owes $1,000 with at 12 percent interest rate more than six years to pay off that debt. With an 18 percent interest rate, it takes almost eight years to get out of debt.
An increase in the minimum payment will shave time and money off the final bill, but people have to be open to it, Ms. Markel said.
“You have to be open to a get-well plan to get well,” she said. “It may be painful, and I see those folks every day with 10 to 15 creditors. Some of those folks can only make the minimum payment.”
Financial institutions may also be willing to work with people on a case-by-case basis.
“If people can’t make a new payment, some banks will allow you to keep the minimum payments you already have,” Ms. Markel said.
For those people in trouble, the Family Support Center has ways to help ease the pain, Ms. Markel said.
The FSC holds “Credit Where Credit is Due” class once a year, she said. The class meets once a week for four weeks and teaches people, not only about credit cards, but auto and home loans as well. Completing the class gets a student a favorable mark in their credit report, which could lead to lower interest rates.
“You could get a lower interest rate because you’re not so much a risk,” she explained.
Financial institutions such as Langley Federal Credit Union are also finding ways to help Airmen.
“We have a financial counselor to help Airmen deal with financial problems,” Mr. Noll said. “He travels to the Family Support Center and other Langley FCU branches.”
Langley FCU also has a low-interest alternative to payday lenders called Quick Cash.
In the end, Mr. Noll and Ms. Markel say it’s important for Airmen to make good decisions when it comes to credit cards.
“The best piece of advice is to try to pay off the bill every month,” Mr. Noll said. “If they spend beyond their means, it creates a circle of debt. If they already have debts, pay beyond the minimums.”