Letter from CC Re: Change in Minimums

[SinkingFast]

We got a letter from one of our CC Creditors today. An interesting offer indeed.

They've noted that our account is overdue.

Duh??!! You think??!! What was the tip off??!! Maybe 5 missed payments??!!

But I digress,.........

Quote from the Letter dated May 4, 2006,

"CC minimum payment requirements are changing. The change may result in an increase for you but you have the option to say "no." If you call to decline the increase, your minimum payment will go back to the old method of calculation. So you can take control of your credit card payment -- to pay more when you can, or pay the lowest possible minimum amount due when that's what you need."

Later in the letter they say they are sending the letter to notify us that it is our "right to decline the change in terms." And again the letter said, "you have the right to say "no" to this increase."

"When you call us we can also suggest other ways to make your payments more affordable. Depending on your circumstances, you may qualify for interest rate reductions, waivers of fees and penalties or even a reduced pay off amount."

Eeenteresting!! Very Eeenteresting!!

We have until June 4th to respond to their offer.

What is with this??!! I thought the new way they calculate payments was required by law. The new method HAD to include 1% of the principal balance plus fees and interest.

We had one CC that went from being an $80/mo payment to nearly $300/mo.

So what's with this "you can say "no" and return to the old payment calculation method." stuff??!!

Wouldn't that be going against the new law??!!

[no_it_all]

The new minimum is now 4 percent of the unpaid balance. Used to be around 2 percent. Since this is a change in your credit agreement, you do have the right to opt out of it. What does that mean? Often if there is a substantial change in the terms of your original cc agreement you will get a letter asking you if you are willing to go along. If not, you have the right to refuse. You refuse by sending a letter to the credit card company. The result is that the CC company maintains the original terms and the original agreement. Why doesn't eveyone just opt out? Well if you do, you no longer can use the credit card.

[Rover]

Perhaps, the change in minimum payments calculation is having an effect on credit card payments which has not yet been reported.

Could the rate of missed/below minimum credit card payments be climbing significantly this year?

Is this an attempt to stem the tide?

[Minnymouth]

Wish they would send me one of "those letters" and me DISCHARGED.........

LOL - what I could do with that....................

[SinkingFast]

We haven't received a notification from them about change in terms of agreement since the new thing that went into effect the end of last year.

It was supposed to take effect the beginning of January this year, but most of our CC's jumped the payments in Dec '05.

We had CC's that were charging as little as 0.5%-1% of the total balance on the card for monthly payments. Most of our CC's were set up to charge 2% of the balance on the card monthly. We only had one card that the new payments didn't affect. That CC was already charging 5% of the total balance on the card every month.

I thought the deal with that change last winter was the payment had to include at least 1% of the principal balance, plus fees, plus interest. At least that's what the paperwork that we got from the CC's said. Maybe 1% of the principal balance, plus fees, plus interest is equal to about 4%??!!

We've kept all correspondence from the CC's since last fall. If there's been a change in the payment calculations method since January, we haven't been notified.

[aa06a47]

I just got an offer from Citi today to consoldate credit cards to one new low interest rate. Sorry dudes, I already have 1 fixed payment now!!!

[no_it_all]

The increased minimum payments are a result of the new bankruptcy laws. The reason for the increase is because the federal government wants credit card companies to make it possible for consumers to pay their debts in a "reasonable" time. The federal governement is pushing for a seven to eleven year payback on credit card debt (it is currently over twenty years!). Also, soon the credit card companies will have to indicate how long it will take you to pay off the balance. Credit card companies really don't want consumers seeing twenty and twenty-five year paybacks. By boosting the minimum payments to four percent, the payback period is reducted greatly and the federal government is satisfied. No mention is made at all regarding the fact that consumers could ALWAYS pay four percent if they wanted to....Now, they just have to!

[no_it_all]

It is anticipated that these changes will result in billions (yes, with a "b") of credit card charge offs in the next couple of quarters for each of the major players in the credit card game...A change in the calculation of minimum payments is a change in the credit card agreement. That is why the letter asks you if you want to opt out or not. If you opt out, you keep the older minimum payments (and no longer can charge on the card).

[anonymuse]

"When you call us we can also suggest other ways to make your payments more affordable. Depending on your circumstances, you may qualify for interest rate reductions, waivers of fees and penalties or even a reduced pay off amount."

This part of the statement is a bunch of bonk! I have called when I get these lovely letters from the creditors and they always say that they won't do anything unless I bring my entire account up-to-date.

[aa06a47]

I'll make this wager. You might pay off the 4% this month, but I'd bet you would use your credit more the next month because your going to be even more cash poor than when you made 1 or 2% payments.

I think the 4% rule will either make people come to there senses about credit card debt, or just spend more on cards because they don't have the extra cash they use to have anymore!

I'm looking at this from my own perspective, I had no wiggle room. To continue to pay the credit cards would have meant I would have had to continue to use them. Each month, the debt was getting larger.

[aa06a47]

It is anticipated that these changes will result in billions (yes, with a "b") of credit card charge offs in the next couple of quarters for each of the major players in the credit card game...A change in the calculation of minimum payments is a change in the credit card agreement. That is why the letter asks you if you want to opt out or not. If you opt out, you keep the older minimum payments (and no longer can charge on the card).

Yes, but they will still make Billions...with a "B". They all seemed to make it fine in the 4th quarter of last year, nearly record profits despite the chargeoffs. Fed raises rates 1/4 point, they raise there rates 2, 3, 4 , 10points....they are making a killing.

[no_it_all]

JP Morgan (Chase) had fourth quarter profits of 2.6 billion or so. They charged off 2.3 billion in bad credit card debt that same quarter...Discover card expects to charge off about a quarter of a billion dollars and Capital One is figuring that about five percent of their total credit card portfolio will be charged off...The federal government suggests that is evidence of consumers being not very credit card savvy....Yes, they still make quite a bit of $$$ though!

[aa06a47]

JP Morgan (Chase) had fourth quarter profits of 1.6 billion or so. They charged off 2.3 billion in bad credit card debt that same quarter...Discover card expects to charge off about a quarter of a billion dollars and Capital One is figuring that about five percent of their total credit card portfolio will be charged off...The federal government suggests that is evidence of consumers being not very credit card savvy....

Well, I would agree with the Federal Government, but the Federal Government should look in the mirror and tell me how bad my finances are. I understand it would take 80K plus for every family to pay the federal deficit. WOW...and Chase thinks they have problems.

Appears Chase and Capitol One and Discover paid several million dollars lobbying for the new BK law which probably cost them a billion or so in write offs more than it normally would have for that one quarter. Not sure when they report first quarter profits, but should be substantially better. BK rate went down to almost nil the first quarter of the year, though I understand the pace is picking up to pre-bk reform act levels.

[anonymuse]

The government is such a role model for responsible spending....NOT!

How many trillions of dollars of national debt now? Those little gnomes in the cellar better get to work printing more money.

[SinkingFast]

It is anticipated that these changes will result in billions (yes, with a "b") of credit card charge offs in the next couple of quarters for each of the major players in the credit card game...A change in the calculation of minimum payments is a change in the credit card agreement. That is why the letter asks you if you want to opt out or not. If you opt out, you keep the older minimum payments (and no longer can charge on the card).

I can't use the card now anyway. Due to non payment, the acct is frozen. So that's not the reason behind this offer. Or if it was, then it was a useless attempt.

I think the "let us help you statement" is just so much Bull$hit anyway. If they wanted to help, they woulda done so when I called them months ago, telling them we were having problems, and asked for help. But, NO! No help was offered.

I ran this by Hubby and he thinks,........ 1) that BK levels are picking back up, 2) the CC companies are trying to stem the tide that's coming, 3) they're not generating new CC takers/accts to replace the surge of pre 10/17 BK filers, and/or 4) people in general aren't charging as much as they were causing reduced revenues.

If the CC can entice people into taking this offer, that's money they don't have to worry about being BK'd against. And this offer would work for people that only have the one acct to worry with. But when you have more than a few, one offer like this isn't much help. Why bother??!!