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High Debt Balances Mean High Minimum Payments
When your balances increase, it is only natural to expect
that your minimum payments will also increase. You expect this
and your monthly statements confirm it. When the payments become
harder to manage, then it comes time to look at what you can do
to get a lower payment without extending the payoff.
How your Minimum Payments are Calculated
Credit card companies generally calculate your payment the
same way. Most card issuers add up the finance charges for the
month and then add an additional 1% of the balance. For example,
if your finance charges were $24 on a $1,400 balance, you would
have to pay $38 as a minimum payment. Only $14 would go toward
the principal balance.
If you owe any additional fees such as late, over-the-limit
or annual fees, those can be added into the minimum payment. Any
past due amounts are also added into the minimum. If you fall
behind one month, that $38 minimum payment can suddenly jump to
$117. That increase is due to additional finance charges, a late
fee of $39 and amounts overdue from the previous month. Now
imaging having a $14,000 balance. It's no wonder debt problems
are so hard to escape.
Getting Help from Credit Card Companies
If this has happened to you, then it may be worthwhile to
contact your credit card issuer for assistance. Let them know
the reason for the missed payment. They know that sometimes a
statement can get lost or overlooked. Most major credit card
issuers will forgive one late payment per year as a courtesy.
This can reverse the late charge and possibly prevent a negative
mark on your credit report. More substantial financial
problems may require a more structured solution. Your creditors
will frequently work with you when they see you as a low risk
and as a good customer. If you show signs of financial weakness,
they may offer less flexibility and
demand a higher interest
rate.
Earning Lower Minimum Payments
To get a lower minimum payment, you must earn it. This is
possible through aggressive repayment. This will reduce your
balance, which will in turn lower subsequent minimum payments.
It can also help you earn lower interest rates, which will
further lower your minimum payment.
When you cannot afford aggressive repayment, then it is time
to meet with a credit counselor. You can still be eligible for
lower interest rates and lower minimum payments if you commit to
a debt management plan. Your commitment to consistent on-time
payments can help you earn
lower interest rates on your credit card accounts. This
reduction in interest allows credit card issuers to grant you a
minimum payment reduction
as a part of your debt management plan. Once you are ready to
commit to eliminating debt and rebuilding your credit, contact a
reputable credit counselor. Gather your latest credit card
statements and schedule a meeting to review your financial
situation and your budget. You will likely find that the stress
of debt can be lifted once you complete your credit counseling
session. Get help
today. |
