Relief For Credit Card Consumers

With a major crisis in the sub-prime mortgage market there are millions of consumers on the verge of losing their homes. But did you know there is another crisis brewing because of credit cards that are at the limit? Yes, there are millions more people that face financial disaster because they are making only minimum payments on their credit card balancesnHere is a story I read recently about Michelle Schimeck. Michelle where she ran up over $20,000 in credit card debt on 5 credit cards, Michelle was using one credit card to pay nMichelle Schimeck, 35, discovered this for herself after running up a combined balance of more than $20,000 on five credit cards. She ended up using a couple of cards to pay down the another to make the minimum required payments.nnMichelle is only months away from financial disaster by using one credit card to pay down another. By doing this Michelle is only sinking further and further into debt without making any strives forward to payoff her balances owing.nnWhile it should be common sense that using one credit card to pay the minimum payments on another will lead to financial disaster very quickly. Many American’s are too busy in their day to day lives just trying to make ends meet that they overlook just what credit card debt will do to their personal finances.nnThe problem is so widespread and serious that Senator Dianne Feinstein introduced Bill S. 2542. The bill brings legislation to the table to protect consumers through America from getting into the same situation. nnSen. Dianne Feinstein (D-Calif.) introduced legislation on January 16, 2008 to protect consumers nationwide from getting into similar problems.nnnBill S. 2542, would mandate that credit card issuers plainly state the dangers of paying only minimum payments on credit card balancesnnCredit card issuers and lending companies will also be required to tell consumers exactly what interest rates they will have to pay if the consumer makes less than what they owe on the credit card each month.nnSenator Feinstein was quoted saying: n"It's unethical and immoral to not let people know what the terms and conditions are. The banks basically don't want people to know. They make money off uninformed consumers who get in over their heads."nnTo illustrate her point, she cited the example of a household with $9,500 in credit card debt and an interest rate of 13.74%.nnIf that family made only the minimum required payment each month and made no other purchases, Feinstein said it would take about 35 years to pay off the $9,500 balance and an additional $12,000 in interest.nnnA separate poll by Gallup and the credit rating agency Experian found that about 11% of cardholders usually make only the minimum payment each month.nnFeinstein's bill wouldn't stop anyone from making minimum payments.nnIt would, however, require card issuers to be much more forthright about the dangers of doing so.nnAmong other things, the bill would mandate that card companies:nn* Include warnings with consumer’s monthly statements that paying the minimum required amount each month will increase the amount of time and money owing on the credit card balance.n nn* Give an explanation of how long it will take to pay off the credit card debt if only the minimum payments are made.n* Provide a toll-free number that customers can call to get all the facts they need.nn* Include the phone number of credit counseling services for consumers to get further help.nnSenator Feinstein’s Bill S. 2542, is proposed so that credit card companies are more upfront about the fees and cost of carrying a balance on a credit card.nnIn the past few years credit card companies have been taking some action to address the problem by increasing the minimum required payment from 2% to 4% of the balance owing. By doing this it reduces the amount of interest accruing on card offers.nnnBut even a 4% minimum payment requirement can get people into trouble, just as more than 2 million people are estimated to be in danger of losing their homes because of too-costly mortgages -- another example of lenders making it all too easy for people to get into financial situations they aren't prepared to deal with.nnSenator Feinstein’s bill won’t solve the problem of credit card debt alone. The bill has been introduced to force credit card companies to be more forthcoming about what the actual charges and fees are so that consumers enter a credit card agreement fully informed.nnThe hope is that an educated consumer is a debt savvy consumer, when people are fully educated the likelihood of people getting in deep financial disaster due to credit card debt is much lower.nn