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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.

I do remember the big stink, too. The problem was, back then, interest was often 2% a month (24%), so there was no principal being paid down. Even at an 18% rate, the principal payment was only 0.5% Now, if the rate is 24% and the customer is being charged interest, the minimum payment will be 3% of the balance - 2% for the interest plus 1% towards principal. With an 18% rate being charged, the minimum payment would be 2.5% - 1.5% for the interest and 1% towards principal. If the customer is at penalty rates of 3% a month, the minimum payment would probably be at least 4%, and possibly more because of fees. If the customer pays off their card every month, their minimum payment would be 1% - because there are no fees or interest being charged.

But according to it wasn't 20 years ago - just 15:

The minimum payment is the lowest amount of money that you are required to pay on your credit card statement each month. See your credit card “terms and conditions” document to see how your credit card’s minimum payment is calculated. Until 2004, minimum payments were commonly as low as 2 percent, which meant that any large balance could take decades to pay off if only the minimum payment was made. Under pressure from federal banking regulators, card issuers ramped up the required minimum payment. The industry standard is now to calculate the minimum as all fees and interest due that month plus 1 percent of the principal amount owed.

I seem to remember that when the CARD Act was being debated, there were discussions about setting minimum payment requirements, but it ended up getting pared back to just requiring issuers to tell customers how long it would take to pay off the debt if they are making minimum payments, and to also tell them how much they needed to pay monthly if they wanted to pay the debt off in 3 years.

So are you telling me that MBNA changed their terms just because of some bad publicity?

Sounds like MBNA changed their terms earlier than other issuers. Maybe it was because of bad publicity - I don't know.

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.

One other thing that the CARD Act put in place was that card issuers could only change terms (minimum payments, interest rates, etc.) once a year, usually in the anniversary month. So, just before the CARD Act went into effect, many issuers increased the minimum payments on 0% loans that they had previously made - sometimes as high as 4% of the principal a month. I seem to remember that this happened on a 0% loan that you had outstanding - maybe on the Citi card?

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