Higher credit card minimum payments in 2006
By Kristin Arnold • Bankrate.com

If you're one of the 7 percent of Americans who make only the minimum payment on their credit card bills, your your monthly bills have gone up.

In the past, credit card companies required customers to pay an average of just 2 percent of their total credit card balance, which meant constant debt for many consumers. The 2 percent minimum payment only covered interest and other fees, so it often could take a lifetime to pay off the principal balance.

By the end of 2005, new banking guidelines went into effect in an effort to save consumers from themselves. Banking regulators issued the guidelines that pressured credit card companies to boost minimum payments so debts would be paid off in a reasonable time. For many banks, that has translated into new rules requiring monthly minimums to cover interest, any fees or extra charges and at least 1 percent of the principal amount.

This comes at a particularly bad time for Americans who are facing both higher interest rates and the new bankruptcy law that makes it harder for consumers to write off their unsecured debts.

Credit card companies contend that if their customers have problems with the new guidelines, they need to contact the companies immediately.

"We want to work with our customers and ensure that they make their payments. If they foresee a problem, then they need to get in touch with us. We can work out some kind of payment adjustment," says Jim Donahue, director of media relations for MBNA.

Consumer advocates say that the going may be tough for many consumers, but they will be better off in the long run because higher payments mean they will pay their balance off earlier and accrue less interest.

Bankrate's calculator illustrates how long it would take to pay off a $12,000 credit card balance, with an 18 percent interest rate, making only minimum payments.

Under the old guidelines, it would take more than 60 years and $34,931.25 in interest to pay off your $12,000 credit card balance.

If your credit card issuer implements the monthly minimums that cover at least 1 percent of the principal balance along with interest charges and fees, it will take 30 years, five months, and cost $17,683.59 in interest to pay off your $12,000 credit card balance.

Bankrate.com researched the top five credit card issuers to find out what monthly minimum guidelines they are following.

• Citigroup -- Includes finance charges and any late fees, plus a minimum payment equal to 1 percent of the customer's balance.
• Chase -- The greater of either 2 percent or 1 percent of the balance plus interest and fees.
• Capital One -- Your minimum payment will be 3 percent of your outstanding balance or $10. If your balance is less than $10, your minimum payment will equal your balance amount.
• American Express -- Two percent of the outstanding balance and finance charges or $15, whichever is greater. If the balance is less than $15 it must be paid in full.
• MBNA -- Includes finance charges, late fees and 1 percent minimum payment toward the principal balance.

It's hard to determine how much minimum monthly payments will go up for every cardholder. Several factors such as fees incurred from late payments or exceeding one's credit limit and interest rate trends play a role in determining that amount.