The Increase in Credit Card Minimum Payments Could Be Good News For You

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When credit card companies increase their minimum payments, consumers howl in protest. When you look at the bigger picture, though, this could actually be a good thing.

The higher minimum payments cover interest, fees and a portion of the principal every month.

With the previous lower minimum payments, only the interest was covered and the debt period was basically extended. You feel like you're getting off easy but you end up paying much, much more than you actually borrowed. Sometimes, the debt even lasts for years.

There is a very real danger that credit card debt can push you into bankruptcy, especially if you persist in paying only the old low minimum payments. In fact, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 orders credit card companies to inform consumers in monthly statements of how long they will remain in debt if they pay only the minimum required for their balance.

The new setup actually forces you to decrease your principal and shorten the life of your debt, freeing you earlier and with less interest.

But I can't afford a higher minimum payment monthly, you say. Then it's time to rethink your spending habits. The higher minimum payments will force you to take stock of what you can and cannot afford, and make the necessary adjustments before it's too late.

The higher minimum payments may even save your future.