Credit card reform went into effect in February, have you noticed any changes on your statement? Credit card companies are required to give consumers more disclosure on credit card statements. The new Minimum Payment Warning section shows consumers the cost of paying the minimum payment only.
In my post Credit Card Reform is Here, I questioned whether the minimum payment information would change consumer behavior. I wrote “It will be interesting to see if consumer behavior is different — once credit card companies start revealing the amount of time it takes to pay off a credit card balance when making minimum payments only.”
Have you seen the Minimum Payment Warning on your credit card statement?
As you can see in the picture, there is a special section titled “Minimum Payment Warning” and it gives you more insight into how long it could take to pay off your balance and how much it may cost you — when you pay the minimum payment only.
Let’s take a closer look at the new Minimum Payment Warning section on my recent credit card bill. According to my credit card statement:
- Credit card balance was $626.35.
- Minimum payment is $12.00.
- The Minimum Payment Warning statement tells you upfront that if you make the minimum payment only, you will pay more and it will take you longer to pay it off. That’s nice, but how much more? How long will it take to pay it off?
- The chart that follows shows you an example of how long it could take and how much money it may cost you making the minimum payment only (on the current balance). For example, if I paid the minimum payment every month, it could take me 7 years to pay off the original balance ($626.35) and may cost a total of $884. That’s over $250 in interest, $257.65 to be exact.
- The next row shows you how paying just a little more every month helps you save money and reduce the repayment period. According to the example if I paid $20/month ($8 more than the minimum payment), then I would save $153 and cut the repayment period by about 60% to 3 years.
Do you think the Minimum Payment Warning will make a difference in the way consumers pay or use credit cards? Please share your thoughts using comments.
Tip: It’s a good money habit to pay your credit card bill off every month to avoid any finance charges. If you think of credit like cash it will help you manage it better.