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We practice CONSUMER BANKRUPTCY
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We practice CONSUMER BANKRUPTCY law exclusively. 

One of the top Bankruptcy Filers

in the Orlando Area

One of the top Bankruptcy Filers

in the Orlando Area

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  4.  » Minimum payments perpetuate credit card debt

For many Florida residents, the “plastic” in their wallets has helped them through tough financial times when there was just not enough pay check left at the end of the month. When the credit card bills come, they are only required to make a minimum payment. What is not to like, right? Unfortunately, making minimum payments only perpetuates credit card debt that can quickly end up becoming more of a financial burden than a help.

Credit card companies used to require customers to make minimum payments of approximately 5 percent of the balance. This allowed a portion of the payment to apply toward principal, which would help pay down the balance faster. That changed in the 2000s when companies only began requiring approximately 2 percent as a minimum payment.

The government then  in and required payments to cover at least any fees, accrued interest and some principal. This increased minimum payments for some, but it was still not enough to help pay down the balance faster. Thereafter, credit card companies were required to tell consumers on their bills how long it would take them to pay off the balance when making only minimum payments. However, when people are using their credit cards in order to pay for essentials, it does not necessarily matter how long it would take to repay.

This is what credit card companies are counting on when they issue cards to consumers. Even if consumers are making minimum payments, their credit scores could be adversely affected if they continue to use their cards, which pushes them closer to their credit limit and reduces their debt-to-income ratio. Florida residents whose credit card debt has grown out of control might consider filing for bankruptcy to stop the cycle. Once the proceedings are over, filers could have a clean slate upon which to start their financial lives over again.

Source: Forbes, “Credit Card Minimums: Perfectly Calibrated To Keep You In Debt“, Claire Tsosie, Nov. 4, 2016