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04/27/2005 Archived Entry: "Credit-card minimum payments to increase"

ONE MORE SIGN OF THE GATHERING ECONOMIC STORM. And why are we getting so few storm warnings?

Within the next year, the minimum required payments on our credit cards are going to double -- from the current 2 percent to 4 percent. This is per a 2003 "guideline" from the U.S. Treasury Department, which is just now being implemented.

The aim is to ensure that borrowers don't end up with "negative amortization" -- that is, that we don't end up owing more and more each month, even after making our minimum payments.

Well, great. Except that the typical American family has somewhere between five and eight credit cards. If they're currently struggling to pay minimums of, say $300, they're going to have a lot of fun trying to pay $600. Anybody who's scraping and borrowing to pay minimums of, say $600, will have a good old time trying to make that $1,200. And if that financial straw on the camel's back pushes them toward bankruptcy ... how convenient for the credit-card issuers, who have just persuaded Congress to make bankruptcy both harder and more expensive for the poor debt-ridden slobs.

"I'm from the government. I'm here to help you." Especially you struggling working-class and middle-class folk.

Really, really, really bizarre that such a huge financial wallop is scarcely receiving a blip of coverage in the media.

There's some good news: Americans may already be starting to pay off their notoriously high credit-card debt. However, the bad news is that a lot may be doing it by pulling the equity out of their homes, encouraged by the party-time attitude of lenders and wild inflation of real-estate "value" in U.S. hot spots.

We are standing very darned near the top of an economic house of cards. You can no doubt imagine a lot of repercussions from a sudden doubling of minimum credit-card payments. When the feds crank up the printing presses even harder than they recently have, will some folks actually be relieved because they'll be able to pay those 4 percent minimums with cheaper dollars?

Very complex. I'm no economist and I don't even play one on TV. But it doesn't take special expertise to see that we're headed into Interesting Times ...

Posted by Claire @ 08:46 AM CST
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