Press Releases

For Immediate Release
December 09, 2005  

Consumer Alert: Minimum Credit Card Payments Rising

(Madison) The Wisconsin Department of Financial Institutions (DFI) wants consumers to be aware that nearly all credit card issuers are in the process of increasing the required minimum monthly payments on their bills, approximately doubling the percentage from 2% to 4% of the card's outstanding balance. The changes are being implemented by the end of 2005.

Credit card issuers are taking this action in response to guidelines issued by a number of federal agencies that regulate the banking industry. DFI Secretary Lorrie Keating Heinemann says, "The higher required payments may hurt consumers in the short term because of the larger checks they must write, but consumers will benefit in the long term due to lower overall interest paid."

The federal agencies, including the Office of the Comptroller of Currency, say that the practice of requiring only very small payments can be harmful to both the card issuer and the consumer. For the issuer, such practices prolong the time it takes to pay off the account and greatly increase the likelihood that accounts become uncollectible. For the consumer, paying only small minimums just prolongs the time it takes to pay off the account plus greatly increasing the amount of interest that must be paid.

Prior to the new guidelines, if a person had a typical credit card with a 19% annual percentage rate and a balance of $1,000, for example, and paid only the minimum payment, it would take 22 years to pay off the balance. This would result in finance charges of $2,400. Clearly, making small payments is not financially wise for the consumer and can only increase financial hardship in the future.

Consumers who are already financially overextended and can barely afford the current minimum payments, however, could find themselves in trouble. These consumers should contact their card issuer to work out a payment plan. Another option is to contact a credit counseling service, which may be able to help in arranging a payment plan or reducing the interest and fees assessed on an account. A list of credit counseling services licensed by DFI can be found at