Regulators force rise in minimum payments on credit cards.

For years credit card companies lowered their required minimum monthly payment. In some cases the payment was not even enough to pay off the interest, which would mean the loan balance would rise every month even if you did not make any purchases.

Now the federal regulators have stepped in and are forcing the credit card companies to set monthly minimum payments as follows.

The payment must cover:

1. All of the interest due.
2. All extra charges due (such as late fees or “over-limit” fees).
3. At least 1% of the principle.

Even under this new system, you will take a very long time to pay off the line of credit you have accumulated. You might think that the 1% per month requirement would mean payoff in 100 months, but every time you make a payment the principle (and the required payment) goes down.

So if you have $1,000 outstanding and make no more charges on the card, you would pay $10 toward principle in first month, $9.90 in second month, $9.80 in third month and so on. It’s like chasing your tail.

The best thing to do is to pay MORE than the minimum every month – as much as you can afford. If you can, pay off the bill entirely every month.

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