Today I received an update to the terms of my credit card agreement with Chase. It's just one of many updates in recent years, but instead of announcing the usual increase in the default interest rate, this time they are increasing my minimum payment from 2% of the balance to 5% of the balance.
This will seriously effect people who are currently paying a low APR on their credit.
I have about $10k in credit card debt. Before the financial crisis got really nasty, I took advantage of some sweet fixed rate balance transfers from Chase. Most of that debt is now at a fixed APR of 2.9% indefinitely.
My minimum payments are a manageable $200/mo. I always pay more than that, but the key has been to pay at least the minimum, on time, every month without fail. That way I can continue to enjoy my low APR instead of the exorbitant default rate. Even with my unemployment, I can still make these payments and put food on the table.
In August, the $200/mo. will go up to $500/mo., and I have doubts about my ability to pay this on time every month. I worry that I will end up defaulting, and then my interest rates will end up being reset to some insane rate that I will never be able to pay.
Essentially, this is a bait and switch- especially since I paid points on the loan in the form of a balance transfer fee. I could only justify the points by amortizing them over the life of the loan, and now since the term of that loan is being drastically reduced it isn't much of a bargain.
I understand that the banks are a little bit cash poor. But isn't that what the TARP money is for? Wouldn't they want to have the money coming in rather than forcing me towards bankruptcy?
I live in a dilapidated cabin with my fianceé and three year old son. We do not have a mortgage. We do not live extravagantly. We are getting by as best as we can with the hope of someday owning a house with insulation, actual drywall, and maybe more than one bathroom. And I don't have health insurance- but that one is pretty obvious.
Being laid off was easy to handle. I was prepared for it- primarily by planning my debt and making it manageable. I even planned for a slight minimum payment increase. But I did not plan for a 150% increase and now I'm slightly ticked. I think I've been better prepared for this than most people, and I can only imagine how distraught other people are over this- that is if they have bothered to look at the change in terms. Some people are going to get their statement in August and completely freak out.
Thanks for reading my rant- and don't forget to read your change of terms from Chase!
I will try to be in and out for comments- but I gotta go cook dinner.