Monday, November 16, 2009

In The UK Minimum Credit Card Payments Could Double

CreditCardComparison.org.uk looks at proposed new legislation regarding credit card payments, how the UK government is concerned about growing credit card debt and to help stem this they are considering putting through legislation to double minimum payments.

(PRWEB) November 16, 2009 -- CreditCardComparison.org.uk a UK based credit card information and comparison website says, "Many people are struggling to pay their minimum credit card payment each month and will not be too happy about a package of measures that the UK Government has recently proposed in an effort to help reduce the amount of debt consumers are carrying."

According to recent reports, the Government is considering passing new laws that will require credit card companies to double their minimum monthly payment requirements in the UK. What does this mean for the British credit card holders? Quite simply, many will find themselves having to pay more each month, but they will also get their debt paid off more quickly and they will lose less money towards interest payments.

According to the Department of Business, Innovation and Skills, increasing minimum payment requirements from 2% to 5% can significantly reduce the amount of time it takes to pay off credit card debt. If a person is carrying £1,800 worth of debt on thier credit card, for example, it will take 40 years to pay off the debt if they pay only the minimum payment each month. Furthermore, it will cost them £4,000 more to pay off their debt at this rate than it would if their minimum payment requirements were set at 5% of their debt.

Christopher Rohan of http://creditcardcomparison.org.uk said "While it is certainly beneficial to get your credit card debt paid off more quickly while also saving £5,000 in the process, the reality is that the increase will force consumers to pay more than twice what they are currently paying toward their minimum payments. For those who are already struggling to pay their bills each month, forcing them to pay more toward their credit card bills could potentially create a snowball effect that leads them into an even greater amount of debt. As such, critics of the proposed law changes maintain that additional measures will need to be put into place for those consumers who are simply unable to afford higher credit card payments."

The reality is that these Government proposals raise a number of interesting questions. For example, is it better to force consumers to pay more each month toward their credit card bills, or should the Government focus more on educating consumers and encouraging them to pay more whenever possible? Second, is the proposed law change and infringement upon the rights of consumers, who should be responsible and capable of monitoring their own finances and determining how much to send to the credit cards each month? On the other hand, is it fair to those consumers who do handle their finances responsibly to be called upon to help bail out other consumers who build up a substantial amount of credit card debt and don't bother to pay it back?

Whether or not this recent Government proposal will be put into action still remains to be seen. Furthermore, even if it is, the date when it will be set into action has not been determined. Christopher Rohan says, "Nonetheless, if you are currently just getting by with a minimum payment each month, you might want to start taking a closer look at your budget and finding a way to send more to your credit cards. Pretty soon, you just might not have a choice."

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[Via Legal / Law]

Posted by prolink at 12:45 AM

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