No. of Recommendations: 2

vkg wrote, Wasn't there a requirement for the minimum credit card payment to payoff the balance in a reasonable amount of time?

Having run some major expenses through my credit card this month, I was surprised that the minimum payment was 1%. No interest or fees this month. At that rate, it would take decades to pay off.

To which you replied, Not exactly. The CARD Act of 2009 requires credit card issuers to disclose to customers how long it would take to pay off the balance if they only make minimum payments, and how much they would need to pay monthly if they want to pay off the balance in 36 months.

A common minimum payment amount is any fees and interest charged during the month, plus 1% of the principal - it sounds like that's the minimum payment calculation that your issuer uses.

Hold on. I recall that about 20 years ago there was a big stink that credit card issuers would often have minimum payments of only 2% (or less) of the balance. The card's terms would be fixed that way, but the issuer would change the rate. Punitive (and sometimes the normal) rate could actually result in the balance slowly increasing over time. I thought this resulted in either legislation being passed or some regulatory rule being issued by the Fed.

This was back when I had an MBNA credit card, before Bank of America bought them. So probably in the late '90s or very early 2000s. MBNA changed the minimum payment terms on their cards to something like $20 plus any accrued interest. Right after that happened, I took them up on a 0% BT offer. The minimum payments were like $20/month until the final payment about a year later. In fact I recall doing this twice. And they were loaning me like $20K each time and I was earning like 4% APY on the float.

And I also recall Fuskie fretting over me not being able to pay it back! :-)

So are you telling me that MBNA changed their terms just because of some bad publicity? I later (December 2004) did something similar with Citibank when they offered me a 0% BT for life loan. They too had a pretty low minimum payment - though I don't think it was as sweet as MBNA's. From what I recall, they had more complex terms where the minimum couldn't be less than 1% of the outstanding balance.

And yes, this was just a little before you and I met.

- Joel
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