I just received my first credit card statement that reflects the provisions of the credit card reform act. One of the new rules states that credit card companies had to modify their monthly statement, showing how long it would take to pay off your account if you pay only the minimum amount. There, on my statement, was a little table. It said that by paying just the minimum amount due, it would take 20 years to pay the entire balance. The second line in the table said that if I added just $10/month to my payment, it would take just 3 years!
Now, I was aware of the 20 year payment plan, having calculated it out in an Excel spreadsheet several years ago, so we don’t do minimum payments. But I was shocked that adding just $10 more per month would knock 17 years off the repayment schedule. Seventeen years! Isn’t it amazing how banks keep the minimum payments adjusted so they can earn interest payments that are basically equivalent to the way a mortgage works? (Except for the consumer tax write-off, of course.)
Another provision of the new credit card rules requires that statements must detail policies for interest rate changes. Apparently if I am late with my payment…even by one day…my current rate will almost triple. And banks don’t understand why “Main Street” is so angry at “Wall Street” these days?
P.S. We took Dave Ramsey‘s Financial Peace University class at a church a couple of years ago. We were inspired to get rid of all our debt, and it really feels good to see our debt snowball get bigger and accelerate the process.