| The minimum payment on next month's credit card bill | | | | As you can see from the above examples, the |
| could be almost double what you were required to | | | | government is onto something, paying off credit cards |
| pay this month due to the Bankruptcy Abuse | | | | more quickly saves consumers a ton of money, but it |
| Prevention and Consumer Protection Act of 2005. | | | | actually increases their minimum payments, making it |
| How will higher credit card minimum payments affect | | | | unaffordable for the Americans who need this sort of |
| your family's finances, and can your mortgage advisor | | | | protection the most. In fact, many of the people whom |
| help you avoid financial hardship or even bankruptcy | | | | we've spoken to in the writing of this article would likely |
| through cash out refinancing, a second mortgage, or a | | | | face bankruptcy after their savings were depleted |
| home equity line of credit? | | | | with these higher payments. |
| Credit Cards can be powerful financial tools when | | | | But is there a better way? For homeowners there are |
| used properly. However, if you're like 35% of our | | | | some very attractive options available. A Cash Out |
| fellow Americans, you are only paying the minimum | | | | Refinance, a Fixed Rate Second Mortgage or Home |
| payment each month, at least according to the Federal | | | | Equity Loan, or a Home Equity Line of credit from your |
| Government Office of the Comptroller of the | | | | mortgage broker is one of the most effective ways to |
| Currency. Federal regulators are currently pressuring | | | | stop paying high interest on credit card debt and to |
| major banks, including major issuers such as Citibank | | | | actually reduce your total monthly payments. For the |
| and MBNA as well as the Bank of America, to | | | | average customer carrying $10,000.00 dollars of credit |
| increase their minimum payments so that consumers | | | | card debt at an APR of 18% their new higher minimum |
| have a fighting chance of paying off their high interest | | | | payment will be 400 dollars, and if they are like most |
| credit card debts. | | | | customers they also have a car loan of $20,000.00 at |
| Today, your credit card minimum payment is usually | | | | 9.5% and pay about $450.00 per month, the typical |
| between 2% to 2.5% of the total debt on your credit | | | | savings realized by consolidating those debts with their |
| card. If you were to pay the minimum payment every | | | | mortgage or taking a second mortgage to pay them |
| month today on $10,000.00 of credit card debt at 18% | | | | off can be 60-70% on their current unsecured or |
| APR, it would take you more than 50 years, 601 | | | | revolving debts, and even more savings come tax |
| payments in total, to pay off your debt, and you would | | | | time through interest deductions available for |
| pay an extra $29,000.00 in interest charges to the | | | | mortgages. |
| bank for the privilege of using their money. | | | | Speak to a mortgage broker and you'll find that you |
| By the end of March 2006, major card issuers | | | | can borrow $35,000.00 per month by refinancing with |
| nationwide will be increasing their minimum payments | | | | cash out, getting a home equity loan or second |
| to effectively 4% of the total debt each month, which | | | | mortgage, or opening a home equity line of credit for |
| for the estimated 50 million Americans who are paying | | | | as little as 200 dollars per month, or even less. |
| the minimum payment each month may mean that | | | | Refinancing with cash out not only pays off your credit |
| their credit card minimum payment will double. | | | | card debt and your car loan at the high interest rates |
| Regulators argue that by paying 4% credit card | | | | associated with credit cards and auto loans, but also |
| minimum payments versus 2% credit card minimum | | | | saves you over $650.00 per month in this scenario by |
| payments, you the consumer will be able to pay off | | | | lowering your total monthly payments. Yes, your |
| your debts more quickly, if you can come up with the | | | | mortgage payment will increase, but your total monthly |
| extra money each month! Taking the above example | | | | payments will actually decrease, putting $650.00 in your |
| of $10,000.00 at 18% APR, you would be able to pay | | | | pocket each month. Use some of that savings to |
| off your credit card debt with a 4% minimum payment | | | | make at least one extra mortgage payment per year |
| in as little as 15 years, and you would pay less than | | | | and you'll pay off that mortgage even faster than you |
| $6,000.00 in interest fees to the bank. That's a savings | | | | could the credit card debt at minimum payment levels. |
| of over $23,000.00 versus a 2% minimum payment. | | | | And you should speak to a tax professional as well, |
| Sounds great right? Higher credit card minimum | | | | because while you cannot deduct credit card or car |
| payments can help you get out of debt faster than | | | | loan interest from your taxable income, in most cases |
| lower minimum payments, but there is one catch. You | | | | you can deduct the interest paid on your mortgage |
| need to pay twice as much every month. So if your | | | | from your taxes, which has the potential to save you |
| minimum payment is currently $400.00, you'll need to | | | | thousands more over the life of the loan. This method |
| find another $400.00 per month just to keep up with | | | | is not for everyone, but if you are a homeowner |
| the new minimums. Even if your bank does not | | | | facing financial constraints and the thought of your |
| increase your rates this coming month, it's only a | | | | credit card minimum payments going up by up to |
| matter of time before they are drawn into compliance | | | | double makes you shiver, it may make sense to speak |
| with the Bankruptcy Abuse Prevention and Consumer | | | | with a mortgage broker and with your accountant |
| Protection Act of 2005 and your credit card minimum | | | | about a debt consolidation refinance or a debt |
| payments rise. | | | | consolidation loan. |