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  • Minimum payment 'Scam"

    So I am working hard at paying off my credit cards. Paying extra on all of them, but the littlest I am focusing all my energy on. On May 1 I paid on the three cards on the money that I make out of my business, so this card I paid $150 on. Yesterday I got the statement for it showing the minimum due is $34 and due on the 23rd. So I am saving on interest by paying it so much sooner as well as paying off the principle. But this is what I found interesting. The balance showing is $690.98 (sent before I made the payment) with the $34 minimum and the interest is 15.24%. Then since I always look, I checked out the box that usually says the minimum payment and how soon to pay off the card. Usually, the timeline is three years which I am sure that some that are struggling to pay off their cards are keeping an eye on and trying hard to meet that. So imagine my surprise when it tells me that if I only pay the current minimum for FIVE (5) years, I will end up paying an estimated total amount of $898. That is $200 MORE than the current total. Why would people do that? If people getting that bill will they think of what a relief it will be to just pay the minimum and if they leave the card open how many can NOT charge on a card that ONLY has a few hundred to pay off. Chase is playing mind games with people and trying to get them to pay much more than needed over the long haul and long haul it will be. After seeing the 3-year minimum for several years it has now jumped up to 5 years of minimum payments. They do NOT want you paying off your cards, this is why I call it a scam. Most likely entirely legal but deceiving especially for folks that aren't good with money. I figure I will have it paid off in 4 months if not sooner. I am going into the slow time of year for my only sales.

    Wanted to post this especially for those new to paying off credit cards so they will be alert to this money grab right when they are getting close to payoff.
    Gailete
    http://www.MoonwishesSewingandCrafts.com

  • #2
    Originally posted by Gailete View Post
    I checked out the box that usually says the minimum payment and how soon to pay off the card. Usually, the timeline is three years
    So imagine my surprise when it tells me that if I only pay the current minimum for FIVE (5) years

    After seeing the 3-year minimum for several years it has now jumped up to 5 years of minimum payments.
    Sorry but that isn't how it works. That box shows how long it will take to pay off your current balance if you only make the minimum payment. That length of time varies based on the size of your balance and the interest rate. It isn't a set 3-year period. It never was.

    I just looked at our two main cards.
    1. Marriott Visa says if we only make the minimum payment it will take about 15 years to pay it off.
    2. Chase Freedom Visa says it will take 4 years to pay it off.

    If your balance goes up or your interest rate goes up, the time to pay it off by only paying the minimum will go up.

    The card companies aren't scamming you with this info. They're actually being totally transparent, something they didn't used to do but the reporting laws changed a number of years ago and they had to start including this information on the statements. That way people can see how bad it is to only pay the minimum. The idea is actually to encourage people to pay more than the minimum.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    Comment


    • #3
      The time could also change if they adjusted the minimum payment.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment


      • #4
        Well, some of us are scamming the cc companies with the rewards cards.

        Yet another example of added costs that come with the financial illiteracy of some people.

        Comment


        • #5
          I guess what I found totally weird is I have been paying around $100 more or less for the last year on the card no matter what the minimum payment was. Last month they showed me that paying the minimum of $33/month it would be paid off in 3 years and then the next month the minimum payment is $34/month for 5 years. All my cards with balances show both 3 years at a particular payment it would be paid off and another amount in years with varying years if paying the minimum it would be paid off in 15, or 22, or whatever and it would be paid off. My concern was for folks not paying fairly close attention and have their minimum go up and the length of pay off increased by 2 more years and no other payoff length of time shown. They will have forgotten that the month before the payoff with essentially the same amount of money minimum, but would now take 2 years longer. Nothing was added to the card, nothing changed. I haven't charged anything to the card in years, so I guess that is why I was puzzled when I saw it. The payoff was upped somehow for a reason that I can't figure out why. I should have seen at least the 3-year and a 5-year payoff if they wanted that long. I, of course, have no intention of taking another 3 or 5 years to pay it off. I do believe though, that "math-challenged" people will either not notice and so end up paying more over the long haul and somehow thinking they got a deal in their pay off and meekly start sending in one dollar less each month for 2 extra years. If nothing else, something that people getting to the end of a long path of getting a card paid off that they can almost taste it, might want to look out for. I have been used to seeing two different amounts, the 3-year and the longer year timeframe to pay off.

          Gailete
          http://www.MoonwishesSewingandCrafts.com

          Comment


          • #6
            Gailete, your last post was kind of confusing. I think a photo might help.



            Every credit card statement has this box. It's required by law. The only time it differs is if the balance is small and paying the minimum will have it paid off in less than 3 years. Then it only has the first line where it says "Only the minimum payment" and wouldn't have the second line showing paying a higher amount.

            It is not possible that you have a $33 minimum one month with a 3-year payoff and the next month had a $34 minimum with a 5-year payoff unless either the balance went up a lot or the interest rate went up a lot. If that is actually true, you should call them and find out why because a mistake was made somewhere which is unlikely but not impossible.

            So far from a scam, this is actually a clear warning of the danger of only paying the minimum. It's even called, in bold print, "Minimum Payment Warning". They are showing you exactly how much extra you will pay and over what period of time if you only make the minimum payment. They also show you how much you can save by paying it off over 3 years instead and how much your monthly payment needs to be to do that.

            If you have a credit card statement that shows something else, can you please post a photo so we can see it?
            Steve

            * Despite the high cost of living, it remains very popular.
            * Why should I pay for my daughter's education when she already knows everything?
            * There are no shortcuts to anywhere worth going.

            Comment


            • #7
              I will try to do that next time I am down by the desktop and the scanner. I'm used to seeing those boxes. Which is why when I got a box with the 5 years on it I was surprised. I haven't charged anything on the card for over 2 years. Perhaps I'm wrong, but I will check and see. I just thought it very odd that instead of the 3 years to pay off there was only a box with 5 years as to pay off and I thought that new law had credit card companies having to show the 3-years of identical payments would lead to the amount being paid off even if it meant making $1K.minimum every month.
              Gailete
              http://www.MoonwishesSewingandCrafts.com

              Comment


              • #8
                This is not a scam. It's an unsecured loan so the interest rate has to be high for the bank to risk lending out the money.

                Only fools finance "stuff" @ double digit interest rates. If you use a card, pay the balance in full, each month, paying zero interest fees.
                Gunga galunga...gunga -- gunga galunga.

                Comment


                • #9
                  Originally posted by greenskeeper View Post
                  This is not a scam. It's an unsecured loan so the interest rate has to be high for the bank to risk lending out the money.

                  Only fools finance "stuff" @ double digit interest rates. If you use a card, pay the balance in full, each month, paying zero interest fees.
                  When you use a credit card, even if you pay it off every month in full (as I do), you still get a statement that shows how long it would take to repay the balance and how much it would cost you to only pay the minimum each month. We were discussing how that information is reported on the statements.
                  Steve

                  * Despite the high cost of living, it remains very popular.
                  * Why should I pay for my daughter's education when she already knows everything?
                  * There are no shortcuts to anywhere worth going.

                  Comment


                  • #10
                    Originally posted by greenskeeper View Post
                    This is not a scam. It's an unsecured loan so the interest rate has to be high for the bank to risk lending out the money.

                    Only fools finance "stuff" @ double digit interest rates. If you use a card, pay the balance in full, each month, paying zero interest fees.
                    Only fools don't charge their propane prebuy if they don't have the cash as that means they will end up paying over $1000 MORE during a heating season which has to come from somewhere. Not everyone has steady sources of income and so those things could be saved for. I have been working hard to pay off all bills and so other than expenses that will be paid off monthly will be charged. I would just as soon have none.
                    Gailete
                    http://www.MoonwishesSewingandCrafts.com

                    Comment


                    • #11
                      Originally posted by disneysteve View Post

                      When you use a credit card, even if you pay it off every month in full (as I do), you still get a statement that shows how long it would take to repay the balance and how much it would cost you to only pay the minimum each month. We were discussing how that information is reported on the statements.
                      I can't get my scanner working, but I did look at the statement for those accounts online, and promptly lost the download of the one. I was incorrect, they have been showing the pay off in 5 years all this year for payoff in 5 years except for the January statement that was 6 years. Easy mistake as we, unfortunately, have three cards with the same company (what happens when people get married and bring their cards into a marriage) and the other two have the 3-year payoffs as well. Since I have been paying on this particular card before I even get the statement I haven't looked closely at it until the other day. I still find it interesting that their calculation of 5 years to pay off the card at $34/month doesn't even begin to match up the amount that would have been paid that is showing as $898. My calculator shows that $34 x ~60 months comes to $2040. I am usually pretty good at math, but this is my first time getting near a total pay off on a card since those new government rules were put in place. I am obviously missing something, as even $34 x ~36 months of payoff still comes to $1224. I understand that interest is being added each month, but I don't understand this 'new' math!

                      For those that do have credit card balances, as you get closer and closer to paying off a card, in my estimation, they should be looking out for longer than 3-years for pay off with sending in only the minimum. Try at least when you get into that last $1000 owed to figure out what it would take to pay off the card that year and go for it. Figure out what you have to skimp on for just a year to pay off that card. If you have been having a fairly easy time to pay it on it, all you need is the extra $15-30/month to combine with your usual payment and in a year it is gone. And if you have more cards and you have been paying on them along the way like you should they will all be smaller as well and then you can pick the next one to work hard to pay it off.

                      More than anything, this is what I wanted to communicate to those that are still at the point of paying off credit cards, watch out for the numbers you may be seeing towards the end. Just because it says you can have the card gone in 4-5 years at a certain pay off amount, doesn't mean that you can't pay off more and thus have the card gone a whole lot sooner.
                      Gailete
                      http://www.MoonwishesSewingandCrafts.com

                      Comment


                      • #12
                        Originally posted by Gailete View Post
                        I still find it interesting that their calculation of 5 years to pay off the card at $34/month doesn't even begin to match up the amount that would have been paid that is showing as $898. My calculator shows that $34 x ~60 months comes to $2040. I am usually pretty good at math, but this is my first time getting near a total pay off on a card since those new government rules were put in place. I am obviously missing something, as even $34 x ~36 months of payoff still comes to $1224. I understand that interest is being added each month, but I don't understand this 'new' math!
                        The minimum payment isn't a fixed amount. It is a percentage of the outstanding balance. So as the balance goes down, the minimum payment goes down. You wouldn't be paying $34/month for all 5 years. Of course, as you noted, you also have to factor in the interest that is accruing along the way. At 15% or more, it builds up pretty quickly.
                        Last edited by disneysteve; 05-05-2019, 03:38 PM.
                        Steve

                        * Despite the high cost of living, it remains very popular.
                        * Why should I pay for my daughter's education when she already knows everything?
                        * There are no shortcuts to anywhere worth going.

                        Comment

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