How to lower minimum payment on your credit card?

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How to lower minimum payment on your credit card?

Postby southerncross » Tue Nov 15, 2011 3:56 pm


I've had an Internet business go out of business and I am having trouble finding work. I currently have no income. I have started a new Internet business, but so far, it does not appear like it is going to generate much sales.

I have $73,000 in credit card debt. The only way I can make minimum payments is by selling stock and I only have 4 months worth left to sell what's left in my stock account and meet the credit card minimum payments.

I am trying to avoid bankruptcy. Some of my credit card payments have a minimum payment as high as $430.

Would it be wise for me to ask the credit card companies for a lower minimum payment - and explain that I am currently out of work? I am afraid once they know I am in financial distress they will red flag the account and cut remaining credit line (or even close the account) and perhaps raise my interest rate on future expenses.

I would really appreciate some recommendations on whether I should ask the credit card banks for a lower minimum payment given my situation.


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Postby frazell » Wed Nov 16, 2011 1:36 am

My advice would be to contact the lender and seek a reduced monthly payment now before you miss payments as that will keep you from getting hit with the negatives of a late payment.

The risk of them slicing your credit line or even restricting new use shouldn't be a concern at all. As since you currently lack any stable and real income you shouldn't be adding more debt to your credit card, period. Credit Cards are one of the most expensive ways to carry and ongoing loan balance. Don't do it.

I'm new here so others may chime in with better advice, but mine is to seek better payment terms and not to charge anything new to the cards. You should stay within your means.

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Postby DoingHomework » Thu Nov 17, 2011 4:35 pm

frazell's advice is good.

Unfortunately the CARD ACT law requires the minimum payment be at a certain level (3% I think). The card company cannot legally lower it in most cases. So calling might not help and could hurt.

You need to do whatever you can, including seasonal and temporary work, to keep up with the minimum payments. And whatever you do, don't pay for anything else on credit.

You have a very high amount of debt even if you had a decent income. You need to somehow find work even if it means giving up on your internet business. I know that may not be easy, but you should be spending most of your time working hard to find a job. Walk every street and bring a resume to every business. Network. Talk to people. Anything you can to find work. If you are doing that you won't have time to run a business that you admit will not generate much cash.

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Theoretical vs practical

Postby Iroquois » Fri Nov 18, 2011 7:14 am

No the CARD act does not require a minimum payment, but it does require that payment terms be prominently disclosed and that terms cannot be changed arbitrarily.

Rather than preach to you that you shouldn't be spending which hopefully has been cut back to minimums, I'll presume that you might be looking at your cards right now as a "lifeline". If that's the case then contacting the bank may give them adequate reason to not only cut your cerdit but also to raise your repayment rates. Most issuers will not work with you to restructure or reduce anything until you are delinquent, unfortunately and sadly, but many individuals would claim hardship to a get a break if they changed this ( rightfully or wrongfully) and many people would rush to take advantage of the system.

If you can find a way to consolidate your debts and in effect refinance them , that may be a way to stretch out your payments and lower the monthly "nut" to cover, but that involves paying more interest over a longer time frame. Based on the circumstances though, that may be very difficult

Relative to cards, it may be best for you personally to preserve your liquidity and lifelines and do everything that is possible to find additional revenue sources to honor your obligations. Failing that may end up with trigger points of delinquency which will start the cascade of chances to work with the issuers but also materially hurt your credit.

Good luck.


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Postby DoingHomework » Fri Nov 18, 2011 1:47 pm

Since I don't really know I'll take Iroquois' word that the Card Act does not require a certain minimum payment. But the minimum payment for most issuers used to be 2% of the outstanding balance and nearly all have raised that to around 3% recently. I assumed (apparently incorrectly) that it was because of the CARD Act. But regardless of the "why", it is unlikely they would lower it for you and simply calling could cause you more harm.

Good for you that you are trying to avoid bankruptcy. But that might be your best option at this point. You might want to talk to an attorney about it. That much debt will take a long time to pay off. A bankruptcy could get it behind you so that you can move on.

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Postby JNK » Sat Nov 19, 2011 8:49 am

@ southerncross

I agree with DoingHomework. At this point in the credit department - and I'm sorry to hear that you're down on your luck in terms of employment and your business - it might be better to sit down with a trustworthy attorney and an accountant and consider other options.


Because honestly, you owe a lot - enough to make a good down payment on a 350K house - and you are unemployed and the lower your payments go, the more and more you'll owe in the long run for as long as you remain unable to pay off good chunks of the 73K that is principally owed which means a higher balance with which to generate more interest with which is added to future balances, etc.

Depending on the interest rate on your credit cards or whatever lines of credit you have and depending on the length of time you have carried your balance and how much interest you have accrued during this time, your minimum payment at this current time might not even be scratching the surface of your principal amount owed. A lower payment means you'll pay even less than - potentially paying off only bits of the interest while accumulating yet more interest in the process - and the interest that is calculated on the carried balance is compounded daily.

Do the math for yourself or have someone else do it for you or simply check your credit card company(s) monthly statements as they should have printed that information on your statements and you can get a feel of what I am trying to explain. It will show how long it will take to pay off whatever it is you owe if paying only the minimum balance. If you're paying even less, it will be for a longer period of time and if you're paying substantially more, it will be for a lesser period of time.

Looking at those numbers and looking at how your current financial status is and how your financial status might be in the near and far future and considering how much money you will need for necessary expenses, would it be worth it to keep doing what you're doing?

That's the thought that I would consider, but that's my own point of view.

I more than fully understand your desire to stay away from bankruptcy, but in my honest opinion, reality is reality and brutal reality is best faced with brutal reality and not idealism.

Consider ALL of your choices, be honest with yourself in terms of expectations, and from there, make the decision(s) that make the most sense in both the long and short term.

@ Iroquois

A card company is a business and no business is going to readily put themselves into a situation where they will be more at risk of losing money than ever before. A payment plan involving lower monthly payments is simply impractical from a business point of view especially since most people who will take advantage of the situation will be those who have the most trouble paying back to begin with. If someone owes 50K on one card and they have multiple major cards, it is entirely possible they also owe similar amounts on the other cards and statistically, it is the people who owe over certain amounts over longer periods of time (not counting businesses owing money) who end up declaring bankruptcy. $25 payments (and bankruptcy) don't pay the bills for the creditors - especially if what is owed is way, way, WAY more than that. More-than-minimum payments when a balance is carried for a shorter term and full payments are what pay the bills because in exchange for a shorter balance carrying term, there is stability in the repayment and reassurance that the creditor will get their borrowed money back within a 'reasonable' amount of time.

That said, creditors CAN and DO offer payment plans for times of hardship and whatnot, but they as a company need assurance/insurance that you WILL eventually, and in the foreseeable near-ish future (not 20 years from now), pay everything back in full without defaulting or showing other risky borrowing behaviors.

Related to that, I did a payment plan a few years ago with one of my creditors and they were willing to negotiate the terms so that I would pay no interest on my amount owed over a period of 6 months... on the condition that I had to default first and that I had to make my payments large enough to cover a decent portion of my principal. Makes sense, because you can only pay off your debt... if you ARE paying off your debt which is the principal amount owed. It also makes sense because when doing the math in calculating future accrued interest, it was worth it to pay more on my principal in exchange for having to pay no interest for 6 months. 6 months' worth of time to pay down my new principal amount without accruing additional compounded interest? Sure! I got my card froze during that time and I managed to pay off a hefty chunk of my principal and when the payment plan was over, my card got reinstated minus a bit of CL chopped off and as I finished paying off what was left, my APR got lowered and then lowered some more.

Though I feel immensely sorry for everyone who has had to endure a situation where their lines of credit became their only lifeline (me included since I have had to do this before) and though credit cards CAN be a definitive lifesaver in certain situations, credit cards were NEVER meant to be long term lifelines and when it comes to carrying balances, long term balances collecting lots of interest with little of the principal being paid off are the biggest danger of them all to both the borrower and the creditor.

Yes, you as a borrower can try to persevere and yes, the creditor can also let you persevere, but is it realistic to either/both parties?

Owing $1,000 that isn't going to grow save for interest if you're temporarily unemployed when times are still 'good' is one situation with a more favorable near-future outcome as it could potentially be paid off within a few months if job hunting proves fruitful right away.

Owing $100,000 that is growing along with added interest if you're temporarily unemployed when times are not so great is another situation with a more questionable near-future outcome as it won't be paid off within a few months even IF job hunting proves fruitful right away UNLESS you earn +six figures and can put almost all of that money each month into the amount owed.

In the first situation, it could very well be worth it - even up to ten thousand depending on the situation regarding income - to sit tight, grit your teeth, and wait it out and simply pay the price. In the second situation, is it worth it to owe that amount of money - not including interest generated during the time the balance is being carried - for the amount of time it would take to pay it back? What if you're unemployed for an entire year?

Preserving one's credit worthiness is important - of that I have no disagreement with - but HOW important is it when it comes to a looming debt with no stable way to pay it off within a reasonable amount of time?
Personal Collection:

AMEX: Everyday (MR), Macy's (cobranded)
MASTER: Citibank Dividend Platinum Select (non-World version)
VISA: Chase Amazon Signature, Chase (bank issued)
GE: Care Credit (medical expenses), Macy's (store), JCP (store)

Business Collection:

AMEX: Costco True Earnings
VISA: Chase Ink Cash

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Postby DoingHomework » Sun Nov 20, 2011 11:18 am

JNK is right.

Credit card companies used to be more willing to offer payment plans because it helped borrowers avoid a bankruptcy that could make the creditor lose out entirely. But now that its is much harder to get credit card debt discharged in bankruptcy they are far less likely to agree to a workout.

When they do agree to a workout it is usually because the hardship is temporary and in the past. If a person was laid off or injured and now has a new job and can make the payments again they will help. If the situation is ongoing then it makes no sense for them to work with the borrower.

They are running businesses. People who don't pay are not customers, they are previous mistakes.

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