Consumers Making Bare Minimum Payment

Wednesday, February 25, 2009, PM | Leave Comment

These days, the economy is so bad – no kidding – some credit card issuers are patronizing consumers to just close down their accounts. They are the consumers who have a history of paying the bare minimum on their credit cards every month. These consumers used to be money-making machines for the credit card companies. Apparently not anymore.

With defaults on the rise, credit-card issuers are employing all sorts of tactics to persuade consumers to reduce their balances and, ideally, close their accounts.

American Express wants to help you

  • American Express is offering some cardholders a $300 gift certificate if they zero out their balance by April 30, 2009.
  • The deals are by invitation only.
  • American Express sent out its offer to a relatively small number of card members who have sizable balances, little spending and payment activity. They did not say how many.
  • Eligible consumers received a special offer code that, when redeemed online by Feb. 28 2009, immediately cancels their account and sets the offer clock in motion.
  • Fail to pay off the balance in full by April 30 2009 and you will be out on both the account and the gift card.
  • The remaining balance must be paid off under your regular card rate and minimum monthly payment.

Citibank wants to help you

  • Citibank is offering to match a portion of the payments some cardholders make beyond the minimum amount due. So, normally, if you make $20 minimum payment and you start paying $30, the bank will match up to a portion of the $10, not necessarily the whole $10.
  • Eligibility and details depend on the customer’s unique circumstances.
  • One customer received 10% back on payments made above the minimum for four months, with a maximum rebate of $550.
  • While participating in the program, she cannot make any purchases on her card. After she completes the program, her account’s $17,750 limit will be cut to just above the balance.

Chase wants to fine you

  • Chase is strict with consumers and is tacking on a $10 monthly fee to the accounts of consumers who have carried a large balance for more than two years.
  • A credit score of more than 800 was not enough to save a customer from Chase’s new policy, which took effect in January 2009.
  • Chase is tacking on a $10 monthly service charge to many low-rate accounts with big debts held for more than two years.
  • The fee is added to the balance, where it earns interest just like any other charge.
  • Chase also raised the minimum monthly payment from 2% of the balance to 5% for affected cardholders.

Moral of the story
Reducing the liability of outstanding balances is an effective way to head off problems at a time when defaults are rising and it has become increasingly difficult to collect.

At first, credit-card issuers targeted cardholders who had not used their accounts in a year or two. Now, they are going after consumers who carry high balances and make few new purchases.

What do you think?

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