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Lower Your Monthly Credit Card Payments
If you want to get a lower minimum payment on your credit cards,
you must be willing to pay down the balances some first. The
reason is that credit card issuers were required to change the
minimum payment calculations beginning in 2006. These minimum
payment calculations are based on finance charges and fees, plus
an extra amount that usually equals 1% or more of the balance.
Getting a lower minimum payment is possible if you are able to
get lower interest rates. Paying down the balance will similarly
reduce your minimum payments. However, if you are serious about
paying off the debt, you must be willing to somehow increase the
principal payments.
Our accredited financial counselors can show you different
options for lowering your minimum payments. Pay Higher Principal while Making Lower Minimum Payments
This may sound like a paradox, but it can be possible to
increase principal payments while making lower minimum payments
if you qualify for a debt management plan. You can often get
lower payments through our program even while making higher
principal payments.
The trick is to reduce your finance charges by a greater
amount than your creditors are reducing your payment. The end
result is a slightly lower payment with a considerably higher
percentage of your minimum payment going toward the principal
rather than for finance charges.
Debt Management Plans May Reduce Minimum Payments
| Principal Balance |
Interest Rate |
Minimum Payment |
Interest Paid |
Principal Paid |
| $10,000 |
20% |
$265.00 (interest +1%) |
$166.67 |
$98.33 |
| $10,000 |
9% |
$220.00 (2.2% of balance) |
$75.00 |
$145.00 |
* Note:
Actual interest rates
and required minimum payments
determined by individual creditors.
Notice that the payment on this account has dropped due to
the way it is calculated through a debt management plan.
Each creditor decides what interest rate to charge in addition to how
the minimum payment is calculated for accounts included in a debt management plan.
While some creditors may require a higher payment, most allow
lower minimum payments to remain current. The second instance
shows how you can save with a lower minimum payment through a
debt management plan while still making higher principal
payments. Subsequent payments would reflect an even lower
interest payment and higher principal payment. The results are lower total interest paid, a lower
initial monthly payment and freedom from debt within
three to
five years. Your Accredited Financial Counselor can help you
evaluate your financial situation to determine what your new
monthly payment would likely be. You can also get a good faith
estimate on how long it will take you to
eliminate your credit
card debt. If you have been struggling with
high debt balances, you can
get relief through lower interest rates and lower payments. |
