Under the new parameters suggested by the Fed, that same $10,000 debt at 13 percent APR with a 4% minimum payment, would be paid off in less than 13 years with a total of $3,664 in interest. On the surface this appears to be a real boon for the consumer, but on closer inspection, this requirement could spell disaster for many. While many consumers are already paying more than the required minimum, according to recent data over 1 in 4 credit card consumers make only the minimum payment some months. Another 1 in 4 currently pays more than the required 2% but less than the 4% that will by year’s end be required by most creditors.

It is a reasonable and logical conclusion that the rationale behind people only paying these minimum amounts is because that is all they can afford. After all, who would intentionally fetter themselves to a debt for 20-30 years if they didn’t have to? Therefore, it is unreasonable to expect those who only pay the 2% minimum, or slightly more, to be able to fork over the additional money a 4% minimum requires. For example, as we illustrated above, under the old requirement, that $10,000 credit card balance would require a minimum payment of $200. Now, that same minimum would jump to $400! Multiply this by several credit cards (the average consumer has 8) and it’s easy to see how this could wreck havoc with even the most well conceived budget.

Over the third and fourth quarters of this year, almost all major creditors will be phasing in these new increased minimum payment plans. So keep a close eye on your statements in the coming months. And although some creditors may vary slightly from the 4% formula, make no mistake about it, the minimums are going up, and going up sharply!

Now more than ever, the relief that can be supplied through a debt management or debt settlement service will be increasingly in demand. Short of bankruptcy, which will be considerably harder to qualify for once the new bankruptcy reform bill takes effect October 17, 2005, these two sources of remedy will become the consumers new best friends and only viable and stigma free avenues of immediate relief. Many debt settlement services are ready to assist anyone facing the additional burden these higher payments will place on them. They are professionals who understand and empathize with your situation. They are ready to give you a free, no obligation analysis of your financial situation, together with recommendations on how to best resolve the problem.