Can You Reduce Minimum Credit Card Payments Without Affecting Credit?
You know your credit card bills are too high because you can't make your payments. The thought of sending in a smaller payment has crossed your mind, but you fear for the ramifications to your credit score. Don't panic yet -- it's possible that you can work out a lowered payment with your credit card company without destroying your credit.
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Higher Minimum Payments
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If you think your credit card minimum payments have risen, it's probably not all in your head. Changes to credit card legislation that took effect in 2010 have resulted in higher minimum payments for many customers as credit card issuers attempt to mitigate the effect of restrictions on applying interest and raising rates that is part of the legislation. What this means for you, the consumer, is that your minimum payments may not be manageable anymore.
Making Less-Than Minimum Payments
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If you decide on your own to reduce your credit card payments, expect your credit score to tank and your credit card balance to increase rather than decrease.
Making less than the minimum payment assigned by your credit card issuer is essentially breaking the agreement you made with the issuer to pay your debt. Fees the issuer adds to your account will increase your balance -- and your minimum payment, in turn -- and eventually raise your interest rate.
If you continue not to pay your bill in full, your creditor may report this to the credit bureau as a "debt not paid in full," which can harm your credit.
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Working With Creditors
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If you're simply unable to pay your credit card minimum payments, contact your creditors to let them know before you take matters into your own hands.
As long as you agree to pay something on the debt, many creditors will work with you to lower minimum payments, reduce your interest rate or do away with it altogether, and drop fees that have compounded your balance. While many of these hardship programs are for a limited time, they can give you the opportunity to catch up on bills and get yourself into a better financial shape before the payment resets.
Get Additional Help
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If you have multiple credit cards with minimum payments you can't make, or a pile of bills you can't pay, credit counseling may be the best way to reduce your minimum payments without destroying your credit.
A reputable, non-profit credit counseling agency can work with you and your creditors to create a debt management plan that will reduce your payments but still help you to pay off your debt. Instead of making payments to your creditors, you pay the credit counseling agency, who in turn makes your payments for you. Debt management plans often last three to five years, and as long as you make your payments to the agency on time, your credit score should improve.
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