New Credit Card Minimum
Consumers who have just been paying minimum credit card payments should prepare for an increase. The new regulations for the minimum payments are starting to be felt by many consumers. If you are having trouble making your payments you may want to consider consolidating those debts by refinancing your home.
Credit card payments have been typically between 1.5 - 2% of the balance of the credit card and now the payments are upwards to 4% of the balance of the credit card.
With the minimum payments adjusting how they are its even more reason to consolidate your debt.
With the increase in credit card payments and many American homeowners starting to feel the "pinch", now is a great time to look into doing a cash out refinance or to look into obtaining a 2nd mortgage or Home Equity Line of Credit. One of the benefits would be that this will help to reduce your overall monthly expenses. Another benefit of consolidating your credit card debt is that most 1st mortgages, 2nd mortgages, and home equity lines of credit give you a grace period of up to 15 days unlike credit cards that will increase your rates if you are even 1 day late with your payments. One more benefit is that the interest on the mortgage may be tax deductible.
Keep in mind the new bankruptcy laws that went into effect October 2005. It will be much harder to just file bankruptcy and eliminate credit card debt. Your best alternative to high credit card payments would be to consolidate them into your mortgage.
You should see a
significant change in your credit score for the positive when you pay your credit cards down with a mortgage refinance.
The increase in the credit card minimum payment is generally bad news for consumers who don't own their own homes, however for homeowners this is an excellent reason to take advantage of the power of their home's equity and finally consolidate those high interest rate credit cards and car loans and roll them into a 30 or 40 year mortgage, spreading out the payments at a very low rate of interest by comparison, and reducing the total monthly spend for your family in the process. And
you'll be even happier when you speak to your tax professional about how much money this will allow you to potentially deduct on your tax returns!
The new regulations on the minimum credit card payments will have a dramatic affect on many credit card users. People who typically have a payment of around $150, can now expect that payment to be as high as $350.
Under the pressure of
federal regulators, banks are starting to announce that they are increasing minimum monthly payments on credit card balances. Obtaining a 2nd mortgage (HELOC, 2nd Trust Deed) can be a valid option to consolidate credit card debt and comes with the added benefit of deducting mortgage interest expenses.
Credit card debts just got harder to deal with. Since the new change in minimum monthly payments went into effect consumers across the board are feeling the pinch. This is one more reason to consolidate and reduce your monthly outgo. Stop paying such high interest rates and free up your cash.
The federal government had nothing but the best of intentions in mind when requiring these new credit card
minimum monthly payments. Under the old minimum payment structure, many consumer credit cards with high balances would take 25 years or more to pay off by just making the minimum payment. The amount of interest that the card holder would pay in such a scenario would be astronomical. The one thing the government didn't fully consider is that making such larger monthly payments will prove very difficult, cash flow wise, for many Americans. If you find that making these higher credit card payments is creating cash flow difficulties for your household, speak with me to see if a debt consolidation refinance might make sense for you situation. What you want to avoid at all costs is falling behind on the credit card payments because once behind it becomes very difficult to get current. This will also lower your credit score making refinancing more difficult and expensive. You can see that it is always better to act before the situation gets out of control.
The average American household with one or more credit cards carries a balance of approx. $9500 dollars. An increase to the minimum monthly payment can impact one's budget severely. It is wise to seek advice from a mortgage professional if this is the case.
The way things stand now aren't a whole lot different then before. If you charge your credit card and make the minimum payments its just like taking a 20 year loan.
Interest rates on mortgages are much lower than those on credit cards. The interest on mortgages is also tax deductible which means you save even more when comparing to the interest on credit cards.
Also if you choose to consolidate your bills you typically will have a savings each month and sometimes you can save hundreds of dollars. Now if you take this amount or even a portion of the savings and apply it to the principle of your new loan you can pay that loan down much faster. One extra payment per year can shave almost 10 years off of a 30 year mortgage.
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Information listed above is to be used for educational purposes only and is not guaranteed