You’re Being Forced To Make Higher Payments


Consumers already burdened by higher energy costs are being saddled with another drain on their finances : higher minimum credit card payments.

The higher minimum credit card payments are the result of January 2003 guidelines issued by the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The Office of the Comptroller of the Currency, or OCC, regulates national banks and is concerned t…

credit cards,debt,bankruptcy

Consumers already burdened by higher energy costs are being saddled with another drain on their finances : higher minimum credit card payments.

The higher minimum credit card payments are the result of January 2003 guidelines issued by the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Office of Thrift Supervision. The Office of the Comptroller of the Currency, or OCC, regulates national banks and is concerned that many cardholders have credit card debts that will take decades to pay back. To prevent this problem, these regulatory agencies proposed that, by the end of 2005, credit card issuers establish reasonable periods for paying back balances, such as a seven- to ten-year payback or amortization period

Card issuers were supposed to adopt the raised minimum payments by the end of 2003. The federal regulatory agencies acted after years of seeing credit card issuers lower minimum payments because of “competitive pressures and a desire to preserve outstanding balances.” Credit card lending consistently yields greater profits for large bank issuers than other services, Federal Reserve data show. But these profits could decrease if consumers pay off debt faster or default on payments, leading to debt write-offs.

The agencies expressed alarm that some banks were setting minimum credit card payments at levels that did not even cover interest. These were seen as predatory lending practices targeting low-income and financially naive consumers. The result was predictable: consumer debt load surged. Consumers were being encouraged to accumulate debts they could not service, resulting in high levels of default and bankruptcy.

Before the new government guidelines were issued, many banks required only 2% of outstanding balance to be paid off each month. For example, take the case of a credit card with $10,000 of debt and an 18% interest rate. Almost 58 years would pass before this debt was completely paid off, assuming the cardholder stuck to the minimum payment each month, according to’s credit card calculator. Total interest paid during that time would be almost three times the original debt, or $28,931. Now, the same cardholder paying 4% of outstanding balance each month would pay back the debt in a more reasonable 15 years and would pay only $5,916 in interest.

In recent years, banks have also raised the charges for cash advances, late payments or spending over the credit limit, helping push more consumers further into debt. These latest changes target credit card holders who don’t pay their bills in full at the end of each month. A 2005 survey by the American Bankers Association (ABA) showed that 43% of consumers carry a balance on their cards.

Nearly three years after regulators said minimum monthly payments should let cardholders pay off debt in a “reasonable period of time,” most banks finally acted. The majority of the top 10 credit card issuers raised their minimum payments in 2005, in most cases, during the last quarter.

Regulators encouraged banks to adjust their minimum payments by the end of 2005. The banks’ delayed response to the January 2003 guidelines caused consumers to be hit with higher credit card bills during the 2005 Christmas season. The increase was combined with a new bankruptcy law which has made it more difficult to erase debt with a Chapter 7 bankruptcy. More consumers are now allowed to declare only Chapter 13, which forces them to repay their debts on a fixed schedule.

Banks say the delay was caused by the time it took to update systems in accordance with the regulators’ instructions. “These are not simple changes,” stated Alan Elias, a spokesman for Washington Mutual. Still, most banks were in compliance at the end of 2005.

Contrary to some rumors, regulators did not require minimum payments to be raised by a fixed amount. However, they said payments should cover fees and finance charges, plus 1% of principal. Some card holders are seeing their minimum payment double, to 4% of the balance from 2%. On a $10,000 balance, payment could rise from $200 to $400.

In the long run, the change is healthy for consumers, since it forces them to pay off credit cards more quickly. Until now, some of the banks charged minimums which did not even cover the interest owed, so debt would just keep growing, resulting in more indebtedness by consumers. But initially, consumers not prepared for the higher payments can experience financial hardship, especially those with lower incomes.

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Family Budget Secrets to lower Household Expenses, Higher Family Income and wise money management


The Home Budget, finances and uncontrolled expenses have caused unhappiness and divorce. Learn the three areas to look for wealth if you want to increase the Family Income and reduce household expenses.

The Family Budget: Consumer Secrets to lower Household Expenses, Higher Family Income and wise money management.

Copyright 2006 AAA Consumer Credit Solutions

A healthy home budget is the key to wealth, success and even a healthy family life. American and Canadian Families could create a much healthier home budget with a bit of discipline and planning. Ask a Consumer and she may tell you, up front, that paying the Grocery Bills gives the greatest cause for concern in the family’s home budget. Too often, money creates family fights. Paying bills, the Home Budget and family finances too often cause divorce. Parents can avoid such calamities with financial discipline, greater research and some professional help. Unfortunately, areas for greatest financial relief too often lie off limits, outside of the usual scrutiny for possible savings in the family’s home budget.

These three areas: Mortgage Payments, Taxation of Income and Credit Card Debts drain away the family’s fortunes in ways we least suspect. In trying to reduce expenses from the Home Budget, you can dismiss high gas prices as a temporary event. Fluctuations in fruit and vegetable prices due to vagaries of the weather can impact the monthly home budget too. Those numbers pale in comparison to the heavy hitters in a home budget, such as Income Taxes paid, Mortgage Interest and excessive and un-necessary loan or Credit Card Payments.

An annual, Income Tax Refund Check can offer relief in many a Family Budget. In order for your family to benefit, you must arrange your finances to profit from all income tax deductions you might be entitled to. You may hear about certain deductions. But since you, like many an employed Consumer, are no Finance Wiz, you tend to ignore them to your peril. Unfortunately, as an Employee, your income tax deductions are limited. They are almost cast in stone by government legislation. As a Business Owner, however, the rules are much more generous. You could save huge sums in income tax payments because of business expenses. Fortunately the distinctions and the rules are not quite as rigid as you might think. Let’s leave out the obvious personal deductions, medical, and educational expenses and similar employee and work related expenses. Here are some additional income tax deductions you can snag if only you had the know-how. These tax deductions, when astutely applied, would add considerable income to your home budget:

1. You can create a Home Based Business and immediately qualify for related expenses as income tax deductions
2. You could increase your Savings for Retirement and for your Pension to create additional income tax deductions
3. You could use Other Peoples Money for Investments. Here again is a third very legit means for tax deductions most Consumers are not familiar with.

These are three key areas around which you could build substantial tax deductible expenses and hence keep a much larger portion of your income. They could add to the Income portion of your Household Budget and significantly reduce expenses.

On the expense side of the Home Budgets, American and Canadian Families pay way too much in housing costs. A recent study of home finance revealed that the cost of housing approaches closer to 50% of the household budget than the 30% and 40% debt service ratios, which bankers use in screening applicants for mortgage financing. Rising House Prices and lower interest charges have allowed many to occupy homes they may soon be unable to afford. Tenants have used rent money to purchase homes. As interest rates continue the recent upward trend, foreclosures will increase and Canadian and American Households as Tenants or Home Owners will be priced out of their regular home expense budget.

Newer approaches to mortgage payments have uncovered huge sums of excess profits that Lenders have been enjoying for years at the expense of the average Home Owner. These studies found that over the life of a mortgage, Consumers typically hand over DOUBLE the Purchase Price of their Homes as extended and un-necessary mortgage payments. At a time of record low interest rates, these large sums represent a voluntary contribution to the Lenders?Profit margins. In the event you are hearing of these developments for the first time, then this over payment of a mortgage applies to you too. Almost every mortgage holder pays too much! Consumers as a group have been cajoled into giving our infinite trust to the Loan or Bank Officers. What we failed to realize is that in the lending industry, no one represents the interests of the Consumer. You must seek out your own professional for help.

The final item of Credit Card Debt relates to impulse buying of clothes, shoes, trinkets, entertainment and vacations, CD’s, snacks, lattes and other consumables. Such expenses dramatically increase the monthly household expenses. As a Parent or Single Mom, responsible for the Home Budget, you would be shocked to review actual expenses from impulse and non-essential purchases. One Bank engages a prominent Financial Planner, who advises Customers to refrain from needless expenses on items such as cigarettes, lattés, candies, coffee, and gum. These savings, they claim, could help to create a tidy retirement fund.

With a bit of discipline, Consumers could reduce expenses by huge amounts in differing ways: 1. At $10.00 a purchase, you could drive a Mercedes Benz by giving up 6000 Trips to the Dollar Store. 2. At $40.00 a pack for cigarettes, a Consumer could have the entire gas bills paid if he simply quit smoking 3. A $250.00 a month Retirement Savings Contribution could result from ignoring the daily craving for an expensive latt?or the three cups of coffee a day habit.

These expenses, when paid by cash, reflect an unnecessary drain on the household budget. Because of service charges, the drain is even more severe when you use Credit Cards and even Debit Cards for small and impulse purchases. All of a sudden, that Latt?which costs you $3.50 is in fact $4.50 if the Credit or Debit Card Company charges a $1.00 fee for each transaction. After one month, that two Lattes-a-day habit becomes a $140.0 a month cost. With maximum financed credit or debit charges they become a $200.00 to $250.00 a month expense.

Consumers can generate huge savings to the Family’s Home Budget from a bit of research and from prudence and discipline in household expenses. It is vital for you to understand mortgages, loans and credit expenses much better. With a little tax planning, some stinginess and some savvy, Consumers can improve the household budget in ways they least expect. As a thrifty Consumer, you must start the search for more efficient ways to run your family’s home budget. The pay back would be terrific.

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