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How to Deal With a Minimum Payment Increase

Nine Ways to Respond to an Increased Minimum Payment

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Chase recently announced a 3% increase in their monthly minimum payment for certain credit cardholders. More credit card issuers could follow. Unfortunately, there's no option to reject the change, so unless you get rid of the balance, you're stuck with the higher payment. Here's what you can do if your card issuer increases your minimum payment.

Call your credit card company.

Contact your credit card company to find out if there is a way to keep your current minimum payment. You may have to accept a higher interest rate, close your credit card, or convert your balance to a fixed rate loan. Weigh these options against the higher rate to see if they will work for you. When Chase raised the minimum payment on some balances in August 2009, many cardholders were able to maintain a low minimum payment by converting their interest rates to a 5-year fixed rate loan. Call your credit card company sooner rather than later to learn your options.

Stop making purchases on the credit card.

The last thing you need is a higher balance on a credit card whose minimum payment is already difficult to afford. Put the credit card away and avoid using it until you've paid your balance off. Then, make small, affordable charges on the card and pay the balance in full each month.

Pay the entire balance.

If you don't have a balance on your credit card, a minimum payment increase won't affect you. If you're actively working toward paying off your credit card balance, you'd be making higher-than-minimum payments anyway. Since your minimum payment is a percent of your credit card balance, reducing your balance will lower your minimum payment. Ultimately, getting rid of credit card debt completely is the best way to avoid credit card changes like minimum payment increases.

Transfer to another credit card.

When you simply can't afford the increased minimum payment, consider moving the balance to a credit card with a lower, more affordable minimum payment. You might end up with a higher interest rate on the new credit card, so make sure you'll still be able to afford the payment.

Shuffle around some debt payment amounts.

If you're in the process of paying off your debts, you're probably sending higher credit card payments to one or more of your other credit cards or loans. In that case, you can lower payments on your other debts to get more money for the increased minimum payment.

Adjust your income tax withholding.

If you typically receive an income tax refund check each year, you can lower the amount of federal taxes withheld from your paycheck. While that means you receive a lower tax refund next year, you'll have more money in each paycheck that you can use to pay your higher minimum payment. Be careful that you don't adjust too much; you could end up owing taxes next April.

Cut your expenses to the bare minimum.

In some cases, the credit card minimum payment increases by $500 or more. If this is true for you, you have to come up with an extra $500 each month to send to your creditor. It's time to take out your household budget and cut back on some expenses. Some areas you can quickly cut back: cable or satellite television, cell phone, landline phone, and eating out. Look at where you've been spending money each month to see where you should cut back.

Enroll in consumer credit counseling.

You may be able to reduce your minimum payment by enrolling in consumer credit counseling. Credit counselors work with your creditors to lower your minimum payments and often your interest rates as well. Be careful though, that your creditor doesn't use credit counseling as an opportunity to increase your interest rate. Unfortunately, if you're backed into a corner, you have have to accept a higher interest rate in exchange for a lower minimum payment.

Use a home equity loan to pay the balance.

Using your home equity loan to pay off debt is risky business. That's because you're using your home as security for your credit card debt. If you fall behind on your credit card payments, your credit gets tarnished. On the other hand, defaulting on a home equity loan puts you at risk of foreclosure and hurts your credit. Nevertheless, a home equity loan is an option you should carefully consider and take at your own risk.

Complain to the FTC.

The Federal Trade Commission, FTC, is a government agency that protect consumers from unfair business practices, including credit card companies. Often, when the FTC receives enough complaints about a particular company, the agency orders that company to end the practice and might even require the company to refund money back to consumers.
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