Atlanta Bankruptcy Attorneys Explain How Increasing Minimum Payments Can Work in Your Favor

Sometimes it seems like credit card companies are out to get us. Especially when they do something like, oh, increase their interest rates, fees and minimum payments right before the holidays.

Call it a downside to the new consumer protection laws. Lawmakers limited the unfair fees they could charge, so creditors are finding new ways to take our hard-earned money. But in one respect, credit card companies are actually doing us a favor.

Previously, many companies charged ultra-low minimum payments - sometimes as small as 2%. While it was meant to look like a good deal for the consumer, it was actually a better deal for the creditor. The smaller your payment each month, the less you pay towards the principal. The less you pay on the principal, the longer you'll keep paying. But that's changing. With an unstable economy and a rise in customer defaults, credit card companies are deciding they want their money ASAP.

I realize that a larger minimum payment can be a hardship. With a 2% minimum, you'd be paying $160 a month on an $8,000 debt. But with a 4% minimum, your monthly payment doubles to $320. That's a lot of extra dough to come up with each month. And the bigger your debt, the bigger the increase.

But here's the good news. At 2% on a 30% APR card, your payments aren't even covering interest - meaning, unless something changes, you'll owe credit card companies potentially forever. But at 4% (or more, if you can manage it) you'll actually be lowering your principal. Credit card companies have automatically helped you reduce your debt burden.

Of course, if you're feeling the pinch like most Americans, increasing your monthly payments won't be a cakewalk. You might need a jumpstart. Fortunately, bankruptcy can do the trick.

With bankruptcy, you'll find an affordable and realistic way to lower or eliminate your debts - plus legal protection against foreclosure and repossession, not to mention annoying phone calls from creditors. At DebtStoppers, we can help identify the plan that's best for you when you sign up for a free one-on-one debt analysis with one of our Atlanta bankruptcy attorneys. Turn your creditors' new rates into your motivation to finally achieve financial freedom.

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