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Credit card debt: Payment info backfiring?

November 23, 2011
By Karen Lawson

Legislation requiring credit card issuers to post how much it costs and how long it takes to pay off credit card debt by making minimum payments may be backfiring according to a study by two professors at Boston College. Marketing professor Kay Lemon and assistant professor Linda Salisbury assert that listing the minimum payment amount on credit card bills potentially encourages consumers to pay an average of 24 percent less per month than they would otherwise pay. 500 U.S. credit card holders were surveyed for this study and anonymous data for approximately 100,000 British consumers holding credit card accounts from 11 credit card issuers were used in this research.

Self-propelled debt relief: Read your entire credit card statements every time

Glossing over several pages of numbers, percentages and fine print contained in each of your credit card statements may be tempting, but it’s also expensive. Here’s what to look for on credit card statements and solicitations:

Repayment scenarios: If you’re making minimum payments on credit card debt of several thousand dollars, your debt could outlive you. Paying more than minimum payments retires the debt faster while saving on finance charges.
Penalty fees: Avoid incurring penalty fees for late payments and worse. Credit card issuers may assess late fees and raise your interest rate for making late payments. Scheduling automatic payments can help with avoiding fees.
Promotional periods with little or no finance charges: These offers are popular during the holidays and for balance transfer solicitations. The catch is that if you don’t repay balances incurred during the specified promotional period, you’ll incur interest from the date of your purchases at the account’s regular rate.
Variable rates are increasingly common for credit cards; always check the annual percentage rate (APR) for rate increases, membership fees, and penalty fees.

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