Banks raise credit card payments

Looking for a Credit Card for Christmas Shopping? Before you submit a credit card application, first review the main points which will help you choose the right credit card for your needs.

What Charges You'll Make - If you're going to use the credit card mainly for booking airline reservations and hotels, it might be best for you to get a travel credit card that offers sky miles and hotel points or cashback. If this will be an emergency credit card only, then your main concern may be for a low interest rate credit card with low fees.

When You'll Repay Charges - Will you pay off credit card charges in full every month, or will you carry a balance month to month? If you're going to carry a balance, you want the lowest possible interest rate as well as a low introductory rate. But if you'll payoff balances in full every month, then interest rate really doesn't matter so no annual fee and/or a long grace period would be a bigger concern. If you're going to carry a balance, be concerned about how the finance charge is calculated. The most common method is the Average Daily Balance, which means that the daily balances are added together and then divided by the number of days in the billing cycle. Stay away from credit cards that compute the balance using two billing cycles, as this method costs more money in financing fees.

What Amount You'll Charge - If you're going to use the credit card for all your monthly expenses, then you need a card that has a high credit limit and a high cashback percentage.

More info about Interest Rates, Credit Limits, Incentives, Fees and Penalties

Interest Rates - The interest rate (Annual Percentage Rate) APR can either be a fixed rate or a variable rate that is tied to another financial indicator, most commonly the prime rate. With a fixed rate credit card you know what the interest rate will be every month, whereas a card with a variable rate can fluctuate. Of course, even the interest of a fixed rate card can change based on certain events, such as paying your credit card bill late, exceeding your limit, or simply because the credit card issuer decides to change it after providing you ample advance notice.

Credit Limit - This is the amount of money the credit card company will let you charge to the card. This amount varies depending upon the card offer and your credit history. Be sure to get a credit card with an ample limit, because getting close to your max can hurt your credit score. Just remember that you don't have to max out your limit just because it's available.

Incentives - To compete for and to gain customers, many credit card companies offer rewards. Even if you normally use cash, why not use your credit card and then use the cash to make the payment during the grace period? You still won't pay interest and meanwhile you'll rack-up rewards. A credit card with 5% cashback will earn you $5 for every $100 charged. If your total bills come to $2,000 per month, you'll earn a free $100 every month. Look for a rewards program that you'll use and which offers flexibility, such as cashback or travel.

Fees and Penalties - Compare common charges such as late fees, overlimit fees, balance transfers, cash advances, and for making payments by telephone. Regarding balance transfers, look for credit card offers with no transaction fees and zero percent interest for at least 12 months.

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Banks raise credit card payments

By Credit Federal | Published 12/22/2005

Banks raise credit card payments

In case you weren't spending enough this holiday season to buy gifts and heat your home, you may have to take another hit: higher credit card payments.

Nearly three years after regulators said minimum monthly payments should let you pay off debt in a "reasonable period of time," some banks are finally acting.

Most of the top 10 credit card issuers have raised their minimum payments this year. And in most cases, they've done so this quarter. (Story: Digging deeper to pay credit minimums)

Regulators urged banks to adjust their minimum payments by the end of 2005. The banks' delayed response to the guidelines issued in January 2003 means millions of people are being hit with higher credit card bills this holiday season.

The increase comes just as energy bills are soaring and a new bankruptcy law has made it harder to erase debt.

"It's quite simply disappointing that banks have waited and have not increased the minimum gradually but are doing it during the holidays," says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group.

Banks say it takes time to update systems to accommodate the regulators' instructions. "These are not simple changes," says Alan Elias, a spokesman for Washington Mutual.

Still, "with a few exceptions, we expect them to be in compliance by year's end," says Barbara Grunkemeyer of the Office of the Comptroller of the Currency, one of the agencies that issued the guidelines.

Regulators didn't require minimum payments to rise by a fixed amount. But they said payments should cover fees and finance charges, plus 1% of principal. Until now, some minimums didn't even cover the interest owed, so debt would just keep growing.

Some card holders could see their minimum payment double, to 4% of the balance from 2%. On a $10,000 balance, the payment could jump to $400 from $200.

In the long run, the change is healthy for consumers: It means they'll pay off their credit cards more quickly. But at least at first, the higher payments could create financial hardship.

John Penn of the American Bankruptcy Institute expects more filings from low-income consumers who can't handle higher credit card payments. "If one of your bills doubled, it won't knock you out of the game immediately," Penn says. "You'll be late on some other bills, and you'll scramble, and it'll catch up to you eventually."

Yet it may not be feasible for some to declare bankruptcy.

"If (issuers) had done this a year ago, consumers who were underwater may have considered bankruptcy," but they may think twice about doing so after the stricter bankruptcy rules have taken effect, says Chi Chi Wu, staff attorney at the National Consumer Law Center.

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Banks raise credit card payments - by <a href=http://creditfederal.com>CreditFederal.com</a> Banks raise credit card payments In case you weren't spending enough this holiday season to buy gifts and heat your home, you may have to take another hit: higher <a href="http://creditfederal.com/creditcard-payment-calculator.html"> credit card payments</a>. Nearly three years after regulators said minimum monthly payments should let you pay off debt in a "reasonable period of time," some banks are finally acting. Most of the top 10 <a href="http://creditfederal.com/credit-card.html"> credit card</a> issuers have raised their minimum payments this year. And in most cases, they've done so this quarter. (Story: Digging deeper to pay credit minimums) Regulators urged banks to adjust their minimum payments by the end of 2005. The banks' delayed response to the guidelines issued in January 2003 means millions of people are being hit with higher credit card bills this holiday season. The increase comes just as energy bills are soaring and a new bankruptcy law has made it harder to erase debt. "It's quite simply disappointing that banks have waited and have not increased the minimum gradually but are doing it during the holidays," says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group. Banks say it takes time to update systems to accommodate the regulators' instructions. "These are not simple changes," says Alan Elias, a spokesman for Washington Mutual. Still, "with a few exceptions, we expect them to be in compliance by year's end," says Barbara Grunkemeyer of the Office of the Comptroller of the Currency, one of the agencies that issued the guidelines. Regulators didn't require minimum payments to rise by a fixed amount. But they said payments should cover fees and finance charges, plus 1% of principal. Until now, some minimums didn't even cover the interest owed, so debt would just keep growing. Some card holders could see their minimum payment double, to 4% of the balance from 2%. On a $10,000 balance, the payment could jump to $400 from $200. In the long run, the change is healthy for consumers: It means they'll pay off their credit cards more quickly. But at least at first, the higher payments could create financial hardship. John Penn of the American Bankruptcy Institute expects more filings from low-income consumers who can't handle higher credit card payments. "If one of your bills doubled, it won't knock you out of the game immediately," Penn says. "You'll be late on some other bills, and you'll scramble, and it'll catch up to you eventually." Yet it may not be feasible for some to declare bankruptcy. "If (issuers) had done this a year ago, consumers who were underwater may have considered bankruptcy," but they may think twice about doing so after the stricter bankruptcy rules have taken effect, says Chi Chi Wu, staff attorney at the National Consumer Law Center. This article provided courtesy of <a href=http://creditfederal.com target=_new>www.CreditFederal.com</a>, a personal credit resource of good or bad credit credit cards and loans.

Credit Tip: Need a high limit for Christmas credit card charges? If you have bad credit, consider a personal loan by refinancing your mortgage. Even if you have cash to buy Christmas presents, we recommend using a prepaid card to make purchases because it's safer than carrying cash.