Credit is due

The federal government, which last year made it more difficult to declare bankruptcy, is now putting the screws on debtors from another direction, by pressuring credit card companies to make monthly billings take more of a bite out of the principal than in the past. While the change may help consumers pay off their debts sooner, it may put them in a worse financial bind in the short term.

Roger, a Sparks man who ran up a $20,000 credit card debt and has paid it down to about $16,000 so far, says his monthly billing has recently gone from about $450 to about $600.

“It’s rough,” he said. “I hope it doesn’t put me under.”

The U.S. Comptroller of the Currency asked credit card lenders to require payments from card holders that include at least 1 percent of the principal on the account. Previously the industry practice was to bill 2 percent of the average credit card balance, which often covered only interest and fees.

The change has led to a round of news stories predicting doubling of credit card payments. (MSN Money: “Your credit card payment just doubled.") Whether that is actually happening is uncertain. In December, one industry source, Index Credit Cards, called those predictions nonsense, but that did not slow down the spread of the predictions.

On Jan. 4, Index Credit Cards released the results of a survey of the seven largest card issuers: “Four of the top issuers are strictly adhering to the new guidelines of one percent of the principal balance, plus interest and fees. Two issuers are making no changes, due to long-standing minimum payment policies that the companies feel already address the government’s concerns. One issuer has thus far made no change to their minimum payment policy of 2 percent of the credit card balance.”

Index Credit Cards research director Justin McHenry said, “Most credit card issuers are adhering to exactly what the government suggested or are sticking with minimum payments already above those guidelines. While some customers will see increased credit card minimums, the impact will be slight—certainly not a doubling.”