| Over the past few years, low minimum payback rates | | | | bear. "If you're living paycheck to paycheck and your |
| of between 2 and 2.5% have encouraged Americans | | | | minimum payment goes from $200 to $275, spread |
| to rack up an average credit card debt of close to | | | | over five cards, that's an extra $375 a month," says |
| $10,000 per household. "People are now in a revolving | | | | Brauer. "A lot of families can't come up with that." |
| debt cycle that they'll never escape," says Adam | | | | Faced with higher interest rates and tougher |
| Brauer, a debtor advocate and in-house counsel for | | | | bankruptcy laws, consumers are wondering what their |
| Debt Settlement USA in Scottsdale, Arizona. "So the | | | | equity loan options are. |
| government nudged credit card companies into saying, | | | | If you now have bad credit due to the new law, you |
| 'This isn't working.'" | | | | could go through a debt-counseling program, but that |
| Regulators with the Office of the Comptroller of the | | | | will damage your credit further. If you are a |
| Currency began pressuring card issuers to raise | | | | homeowner, you may want to consider a debt |
| minimum monthly payments. On top of that, the newly | | | | consolidation loan through a mortgage refinance or |
| enacted Bankruptcy Abuse Prevention and Consumer | | | | home equity loan (second mortgage) because it will |
| Protection Act of 2005 now requires credit card | | | | not only reduce your debt, but you also may get a |
| companies to post a warning on monthly statements | | | | 100% tax deduction on the interest you pay on your |
| that notifies consumers about how long they'll be in | | | | loan. With interest rates rising, it is probably best to |
| debt if they make only minimum payments. The new | | | | secure mortgage refinancing with a fixed interest rate |
| law for minimum payments went into effect at the end | | | | or, if the rate on your existing mortgage is low, get a |
| of 2005, and several credit card companies have | | | | second mortgage to consolidate your credit card debt. |
| already doubled their minimum monthly payments from | | | | The rates will be much lower than those of your credit |
| 2% to 4%. | | | | cards and other loans, and you'll enjoy the piece of |
| While the new law is designed to get people out of | | | | mind of having your debts under control with a simple |
| debt faster, some people whose finances are already | | | | interest loan. |
| stretched thin find the rate hikes to be too much to | | | | |