Are Your Minimum Monthly Credit Card Payments Really Going to Double?

The Problem

Before going into the details of why minimum monthly credit card payments are changing, let’s look at the reason why they needed to change in the first place.

Previously, credit card companies were generally requiring 2 percent of the balance of the credit card as the minimum monthly payment. That means if your credit card balance was $10,000, your minimum monthly credit card payment would have been $200.

But what if you had a high-interest credit card and the interest on that month’s statement came to $195? Then you were really only paying $5 off the balance of your credit card -- in essence, getting you nowhere.

In fact, a few people found themselves moving backwards because their minimum monthly payments didn’t even cover the amount of interest being charged on the card.

And this is why the Office of the Comptroller of Currency felt that measures had to be taken.

So What’s the Real Deal?

Now many people have been saying that the minimum monthly credit card payment has been raised from 2 percent of the credit card balance to 4 percent of the credit card balance in order to correct this problem. This isn’t exactly true.

What’s happening is that credit card companies are now required to charge a minimum monthly credit card payment that reduces the borrower’s credit card debt by 1 percent. This means the new minimum monthly credit card payments are going to be at least 1 percent of the balance plus the interest and any other associated fees.

So if your credit card balance is $10,000 and the interest was $195 and there were no other fees associated with your account, you would be paying $100 towards the balance and $195 in interest for a total of $295 whereas before, you would only have been paying $200.

So while minimum monthly credit card payments are indeed changing (and for the better as far as I’m concerned), they are not in fact doubling as many had previously thought.

As always, the best way to pay off as much of your credit card balance as possible with each monthly payment is to opt for a low-interest credit card and pay as much each month as you possibly can.

Visit this website for a list of low APR interest credit card offers.