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My daughter did a $4850.88 balance transfer from AMEX over to Discover, for the advantage of 0% interest for 12 months. The transfer fee was $145.53, so now total Discover card balance is $4996.41.

Her minimum AMEX payments were $49/month. Her minimum Discover payments will be $100/month!

I admit to being quite surprised at the difference in these 2 minimum payments. Do individual credit card companies set their own 'payment scale'? Sadly, had she known of the significant difference in minimum monthly payments, she would have never applied for the balance transfer, as this increased monthly payment will impact budget.

Concerned Mom,
Apacherose
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Each card can set its own payment schedule, within some more general guidelines.

They would have disclosed it in the terms of the account at sign up.
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My daughter did a $4850.88 balance transfer from AMEX over to Discover, for the advantage of 0% interest for 12 months. The transfer fee was $145.53, so now total Discover card balance is $4996.41.

Her minimum AMEX payments were $49/month. Her minimum Discover payments will be $100/month!

I admit to being quite surprised at the difference in these 2 minimum payments. Do individual credit card companies set their own 'payment scale'?


Not sure why either of you is surprised. Especially for those who are cash-flow strapped, the calculation of the minimum payment is one of the things that is recommended be checked prior to doing any BT. (This is especially true for those who are transferring from a fixed payment/amortized loan to a credit card loan, as many fixed payment loans are calculated over a longer time frame, so the payments are lower even if the rate is higher.) And in this case, it doesn't take a lot of work to get a good idea of what a minimum payment might be. Going to www.discover.com and entering 'minimum payment' into the search box gives you a link to "A Sample Cardmember Agreement"
https://www.discover.com/credit-cards/cardmember-agreement/p... payment&srchS=internet_cm_corp&srchC=internet_cm_fe&srchP=1
that explains how much the minimum payment based on this agreement will be, with what seem to be the critical parts bolded:

Minimum Payment Due

What is the Minimum Payment Due?

In order to avoid a late fee, you're required to pay at least the Minimum Payment Due each month. You can find your Minimum Payment Due by logging in to the Account Center or on your statement.

Why does my Minimum Payment Due change?

Your Minimum Payment Due is based on a number of factors such as your outstanding balance, APRs, as well as any late fees and past due amounts. Because these factors can vary, so can your Minimum Payment Due.

You may pay the entire New Balance shown on your billing statement at any time. Each billing period you must pay at least the Minimum Payment Due by the Payment Due Date shown on your billing statement. The Minimum Payment Due will be any amount past due plus the greater of:
- $35; or
- 2% of the New Balance shown on your billing statement; or
- any Interest Charges and Late Fee shown on your billing statement, plus $20.

The Minimum Payment Due may also include amounts by which you exceed your Account credit line. It will never exceed the New Balance. When we calculate the Minimum Payment Due, we may subtract from the New Balance certain fees added to your Account during the billing period. The Minimum Payment Due is rounded up to the nearest dollar.


So, for a balance of $4996.41, 2% would be $99.93 - rounded up to the nearest dollar, it would be $100.00 I've actually seen balance transfers where the first minimum payment is to pay the entire BT fee, plus some. So, for your daughter, it could have been worse. She might have had to pay something over $145 the first month.

Since this is a sample cardmember agreement, it may not be exactly the same as hers, but it seems to match the minimum payment you quoted. She should read her agreement to see if this is the way her minimum payment is calculated.

If she didn't have a copy of her cardmember agreement at the time that she committed to the balance transfer, she should have asked a representative how the minimum payment was calculated, and what her minimum payment for the new balance would be.

And yes, credit card companies do calculate minimum payments differently. About 6 years ago, just before the CARD act of 2009 went into effect, a lot of companies changed their minimum payment calculations. In fact, Chase tried to begin requiring customers with zero/low rate balance transfers to make minimum payments of 5% of their BT balances. Here's a thread about that: http://boards.fool.com/chase-new-minimums-27190269.aspx?sort... In your daughter's case, that would have meant a minimum payment of $250/month. I seem to recall Chase got hit with a class action suit about that action, and ended up not implementing it, or else pulling back on it pretty quickly, but you can probably find some information on it yourself if you're interested.

Credit card companies are required by the CARD act to have minimum payments that result in the borrower 'making progress' toward paying off their debt. Each company interprets that requirement differently, but most base it on paying a percentage of the balance, plus any interest and/or fees owed.

Sadly, had she known of the significant difference in minimum monthly payments, she would have never applied for the balance transfer, as this increased monthly payment will impact budget.

Hopefully, she can adjust her budget to make the new, higher payment. On the good side, since it appears that her minimum payment may be calculated based on the 2% rule, each time she makes a $100 payment, her next minimum payment should go down by $2/month. And, instead of taking 8 or 10 years to pay off American Express, she could have Discover paid off in only 4 or 5 years, depending on what the interest rate will be once the promotional period expires, assuming she continues to make a $100/month payment.

AJ
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I found this survey of companies and their minimum balances that might be helpful. Of course, it would be good to double check.

http://www.creditcards.com/credit-card-news/minimum-credit_c...
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Her minimum AMEX payments were $49/month. Her minimum Discover payments will be $100/month!

Was the AMEX a 0% balance transfer that was about to expire? I don't see any other way the minimum payment would be 1%. I thought the minimum payments were now required to be at least monthly interest plus 1%.
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apacherose,

You wrote, Her minimum AMEX payments were $49/month. Her minimum Discover payments will be $100/month!

I admit to being quite surprised at the difference in these 2 minimum payments. Do individual credit card companies set their own 'payment scale'? Sadly, had she known of the significant difference in minimum monthly payments, she would have never applied for the balance transfer, as this increased monthly payment will impact budget.


Anyone that gets into debt and can't make a minimum payment of 2% of the balance is just asking for (big) trouble.

A 2% minimum payment (alternately 1/48th of the balance) had been the NORM for decades. Several years back the CARD Act changed how this was calculated and it raised minimum payments for some and lowered it for others.

Put another way, What was your daughter thinking? Expecting to spend nearly $5K, but not able to budget at least $100/month to paying it back? What kind of terms did she think she'd be getting?

- Joel
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Was the AMEX a 0% balance transfer that was about to expire? I don't see any other way the minimum payment would be 1%.

To vkg's point, looking at the way that AMEX calculates their minimum payment, it does look like your daughter's $49 payment was based on a 0% rate, which probably was due to expire. If the rate on the AMEX was higher than 12% (which I find quite likely, given that their typical non-promotional rates in application disclosures seem to be 12.99% - 21.99%), when her promo rate expired, her minimum payment also would have also been higher than $100.

And what was she going to do when the Discover promo rate expired in a year? If she can only pay $50/month, net of the $145 BT fee, she would have only paid the debt down by $455. Adding another BT fee to transfer it to another card, the debt would probably be back up to almost $4700 (or more) - at best, making only $300 of progress in year, or a decrease of $25/month.

She has built up enough debt without paying it off that she either needs to increase her income or decrease her other expenses, so that she can pay more than the minimum payments, or she runs the possibility of continuing to pay on this same debt (transferred around multiple times) in her retirement. By only making minimum payments on this debt, it may fit into her 'budget' more easily, but she certainly isn't doing herself any favors - it would be a shame for such a small amount of debt, but she'd probably be better off in the long run if she declared BK.


AJ
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I hope your daughter--and her spouse, if there is one--have stopped charging their CCs altogether. It would be even worse to have another growing CC bill on top of this one. (And if her debt was due to medical care, pls forgive my impertinence-)

Has DD made a budget for herself/family? Even if your daughter thinks she cannot snowball to get rid of this debt sooner, or set aside money for occasional bills that so often do people in (Christmas gifts, car repairs, dental care, clothing for growing children…), there's very likely discretionary spending that can be reduced--even necessary spending can often be reduced.

I don't know your daughter's age, if she's employed or not, or if she's a mother, but most people can usually find a little time & energy to do odd jobs even if a full time or second job is out of the question.

I wish her good luck!
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