Making Minimum Payments?

There’s good news and bad news. The bad news is that credit card companies are increasing the minimum monthly payment. That’s also the good news. What?

Under federal pressure, most large credit card issuers recently announced that they are increasing minimum monthly payments on credit card balances, and others are expected to follow suit in the near future. To some cardholders that could be seen as a good thing.

To others it could be devastating. If you can handle the increased payment, it's good.

Let's face it, if you’re making minimum payments, you may already be in trouble. The feds think requiring higher monthly payments will help consumers get out of debt faster.

Of course, if your finances are already squeezed to the breaking point, the rate hike is good for you in the long run, but hard to take right now.

If you're living paycheck to paycheck and your minimum payment goes from $200 to $275, spread over five cards, that's an extra $375 a month.

Get started saving more today

If you normally get a tax refund when you file, adjust your withholding to a lower level. That can free up some funds immediately. Curb your spending. Take your lunch to work. Cut down on video rentals. Do your own laundry. Clip coupons and save on groceries. Drink tap water instead of the more expensive bottled brands. Cut back here and there. You’ll be surprised how much you will have left to apply to your monthly credit card payments.

 “I always tell people there are two sins: not paying, and not paying as agreed,” says Cate Williams, vice president of financial literacy for Money Management International, in Chicago. Most creditors would rather opt for the latter, so give your credit card company a call to see if you can either negotiate a reasonable payment arrangement or reduce your interest rate. Otherwise, missing a payment can quickly have you fielding calls from collections agencies -- and at that point, no one will be willing to listen to you, says Williams.