If you charge a lot on your credit cards only to make the minimum payment, you could be in for a rude awakening. Many companies have hiked the minimum rate--meaning you could end up having to pay twice as much as you expected.
The government has ordered credit card companies to up the minimum charge. It's not an increase in the interest rate--it's a charge that goes toward the debt.
"It's probably going to force people to actually pay off their credit cards a lot sooner," said Gary Thurber of the not-for-profit Consumer Credit Counseling Services of Syracuse, which helps people manage their debt and also serves the North Country.
Thurber said the government's plan is a good idea in theory, but some consumers might get in over their head.
He said the typical CCCS client has six to eight credit cards and carries $20,000 in debt.
Under the new rate, credit cards will charge up to four percent for every billing period. The old rate was two percent.
So instead of paying $400 on a $20,000 bill, you'll now pay $800. The bigger the debt, the bigger the payment.
"It's going to be very difficult for a lot of people that were just making minimum payments before, especially if they've had several different credit cards," said Thurber.
He said he expects a 20 percent increase in CCCS clientele in the new year due to the credit card company changes.
There are some ways to alleviate some of the pain in your wallet.
The easiest way to avoid trouble is to never charge more than you can afford to pay in full once the bill shows up.
However, if you do have to keep a balance from month to month, talk to your credit card company to try to negotiate a lower interest rate.
You can check out the Consumer Credit Counseling Services Web site by clicking here.
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