The Credit Card Minimum Hike
In 2006 with increasing pressure from federal authorities to help consumers pay off their debt faster, many credit card companies doubled their minimum payments . The idea was with high, compounded interest charges and low monthly payments, too many Americans were staying mired in credit card debt , and although some card holders have yet to feel the effects from this move, others saw their monthly payments increase from 2% to 4% of the balance. For overextended consumers who were just making the minimum payments, this hike had a devastating impact on their ability to stay current, causing many to fall behind or delinquent. Many experts considered the situation the "Perfect Storm" because not only did the increased minimum payments cause many debtors to become past due, but with stricter bankruptcy laws with the passage of BAPCA (The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 , getting debt relief wasn’t easy.
Due to this, many consumers turned to debt management programs offering debt settlement and debt counseling. These programs were helpful in helping many consumers reduce their monthly payments, consolidate their debt, and avoid bankruptcy.
Reducing Your Interest Payments
For consumers who are concerned with lowering their interest payments, a good choice is debt counseling. Many of these organizations are non-profit debt agencies that work specifically with credit card companies and consumers to find mutually agreeable payment terms. On average, this can result in interest rates lowered to 10% and one easy payment each month. Most credit counselors work primarily with unsecured debt like credit cards , medical bills , personal loans , and deficiency balances from repossessions.
Reducing Credit Card Debt
For consumers who are truly overextended with their monthly payments, a better solution may be debt negotiation, also known as debt settlement or debt reduction. This type of plan involves negotiating with credit card companies to lower the principal balance owed on a debt. For this reason, it is a faster and less expensive way to get out of debt than consumer credit counseling, and you can see much more dramatic savings on your minimum payments.
To calculate your monthly payments or get a quote, simply fill out a form and let PayingPaul.Com match you with a provider for an estimate.
Frequently Asked Questions
What is the effect of non payment on credit cards?
There are several ways this can affect you. First, the credit card companies can report that no payment was received to the credit bureaus, which will have negative credit effects . Secondly, in many cases, the credit card companies will forward your account to a debt collection agency after 3 or more consecutive non payments or to an attorney to collect the full balance. Finally, with no payments on a credit card the banks are allowed to increase your interest rate and charge late fees to your account.
My credit card payment is past due and the credit card companies are threatening to charge off my account. What does this mean? <
A charge off is a creditor’s way of telling the IRS that they do not expect to collect the balance on a debt, and therefore, they want the debt written off as a loss on their corporate profit and loss statement, which will save them on taxes at the end of the year. Although the credit card debt is being treated as a loss for accounting purposes, the creditor will still try to collect the balance and you are still liable to pay it, even if it technically a bad debt.