With January 1st rapidly approaching, the year isn’t the only thing that will be changing; big changes are in the works for credit cards as well. Since most Americans have become dependent on credit as a primary means of purchasing everything from groceries to airline tickets, these changes will affect almost everyone.

One change that will have a huge impact on consumers is the hike in credit card monthly minimum payments. For a while now, minimum payments have been around 2-2.5%. These low rates have encouraged consumers to spend, spend, and spend since they don’t have to pay much each month for their purchases.

However, the low rates have also led to increasing amounts of debt for American families and that worries the government. So, the government put pressure on the credit card industry, which is resulting in higher minimum payments. Select credit cards will be switching to 4% payments in January 2006.

This change can be a good or bad thing, depending on your situation. If you can afford to make increased payments on your credit cards each month, this change is positive because it will get you out of debt faster. Also, knowing that you will have to be paying more each month will keep you from going crazy on you credit card spending; at least I know it will for me! However, if you can barely make the minimum payments as it is, this could push you towards bankruptcy. The new bankruptcy laws, though, have made it harder to file for bankruptcy, requiring that you first work with a credit counseling or debt settlement agency.

So things could get sticky for people who can’t afford to pay more each month. A word of advice, then, for holiday spending: be careful! Those bills that come in January will be higher than they have been before. So you can either pay with cash, switch to a lower interest rate credit card, or continue doing the same thing over and over, expecting a different debt-free result!

Another change to look for in 2006 is an increase in contactless payment technology for credit cards. We have all seen the commercials for the new credit cards that you just scan like a bar code and then are on your way. These new forms of charging are supposed to be 40% faster than paying with an actual credit card, which is why retailers like the idea. Faster payment means shorten lines which means happier customers. So where is the problem in all of this? I guess it is just one more way to make paying with credit quicker and easier. And then we are back in debt for another year…

This entry was posted on Thursday, December 15th, 2005 at 2:22 pm and is filed under Credit. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.