# Key Post: The minimum payment isn't enough



## daltonr (11 Jun 2003)

AIB are currectly sending out details of "a new offer" with their credit cards.  Their minimum payment is currently set at 5% of the outstanding balance, the offer is to reduce this to 3%.

Don't do it.

First of all you should be clearing the balance each month, but that's not the reality for most people, so if you are running a balance make sure you are paying quite a bit more than the minimum.

The low minimum payment combined with high interest rates ensures that even a relatively small debt can take years, or even decades to clear if only the minimum is paid each month.
This isn't an accident,  It's carefully designed.

I'm guessing that interest rate reductions have thrown their calculations out of whack and the 5% minimum is allowing people to clear the debt quicker than before.  They've decided to reduce the minimum to 3% to put things back they way they were.  Eternal debt for the consumer.
I don't recall any consumer ever complaining that their minimum payment was too high each month.  Consumers are more concerned with the ludicrous interest rates.

Apparently you have to notify them if you want it changed to 3%.  Don't do it.  Stick to 5% and pay more than this every month if you possibly can.

Remember, "special" offers from financial institutions are
rarely special.

-Rd


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## ClubMan (11 Jun 2003)

*Apparently you have to notify them if you want it changed to 3%. Don't do it. Stick to 5% and pay more than this every month if you possibly can.*

More to the point - if you find that you continually have an outstanding credit card balance and/or can't clear it most or all billing periods then get rid of the credit card and review your spending habits immediately!


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## davelerave (11 Jun 2003)

*ccards*

they're so lame with their ideas,650 is their minimum credit limit i reduced it recently.as for their pensions advisors(sales reps) don't get me started there.


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## rainyday (11 Jun 2003)

The exception to this would be where you are taking advantage of AIB's 0% balance transfer offer - In this case, it would make perfect sense to reduce your payments to the absolute minimum (i.e. 3%) for the six months of the offer.


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## ClubMan (11 Jun 2003)

*The exception to this would be where you are taking advantage of AIB's 0% balance transfer offer *

Yes - there are always exceptions but in general, if you can't control your credit card spending/balance then you shouldn't have a credit card and short term low or no interest offers are not going to change the bad habits and could actually exacerbate them.


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## davelerave (12 Jun 2003)

it's not always bad habits to blame sometimes people are just short of money


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## daltonr (12 Jun 2003)

Yeah,  It's not vital to clear the balance completely each month.  Credit Cards are handy for those months with exceptional items like Insurance/Back to School or whatever.  As long as it's paid down pretty quickly it's a lot handier than going for a small loan of $1000 or $2000 every time there's an emergency, and if it's paid off over two or three months it's fine.  These cards are an expensive service, but that doesn't mean that only silly or irresponsible people use them or max them out.

The problem occurs when the balance is almost permanently at the limit, and the limit is constantly increasing.  Or when a second and third card is acquired because the first is maxed out.  The temptation might be to pay the minimum on the cards in this situation.

Just so long as people know that the minimum payment is set for the banks benefit, not yours.  That's all this post was about.

-Rd


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