When your balances increase, it is only natural to expect that your minimum payments will also increase. You expect this and your monthly statements confirm it. When the payments become harder to manage, then it comes time to look at what you can do to get a lower payment without extending the payoff.
How are your Minimum Payments Calculated?
Credit card companies generally calculate your payment the same way. Most card issuers add up the
finance charges for the month and then add an additional 1% of the balance. For example, if your finance charges were $24 on a $1,400 balance, you would have to pay $38 as a minimum payment. Only $14 would go toward the principal balance.
If you owe any additional fees such as late, over-the-limit or annual fees, those can be added into the minimum payment. Any past due amounts are also added into the minimum. If you fall behind one month, that $38 minimum payment can suddenly jump to $117. That increase is due to additional finance charges, a late fee of $39 and amounts overdue from the previous month. Now imagine having a $14,000 balance. It’s no wonder debt problems are so hard to escape.
Getting Help from Credit Card Companies
If this has happened to you, then it may be worthwhile to contact your credit card issuer for assistance. Let them know the reason for the missed payment. They know that sometimes a statement can get lost or overlooked. Most major credit card issuers will forgive one late payment per year as a courtesy. This can reverse the late charge and possibly prevent a negative mark on your credit report.
More substantial financial problems may require a more structured solution. Your creditors will frequently work with you when they see you as a low risk and as a good customer. If you show signs of financial weakness, they may offer less flexibility and demand a higher interest rate.
Earning Lower Minimum Payments
To get a lower minimum payment, you must earn it. This is possible through aggressive repayment. This will reduce your balance, which will, in turn, lower subsequent minimum payments. It can also help you earn lower interest rates, which will further lower your minimum payment.
When you cannot afford aggressive repayment, then it is time to meet with a credit counselor. You can still be eligible for lower interest rates and lower minimum payments if you commit to a debt management plan. Your commitment to consistent on-time payments can help you earn lower interest rates on your credit card accounts. This reduction in interest allows credit card issuers to grant you a minimum payment reduction as a part of your debt management plan.
Once you are ready to commit to eliminating debt and rebuilding your credit, contact a reputable credit counselor. Gather your latest credit card statements and schedule a meeting to review your financial situation and your budget. You will likely find that the stress of debt can be lifted once you complete your credit counseling session.