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Dear Debt Adviser,
Can I pay less than the minimum payment on my credit card? I am finding it difficult to pay the monthly
payment. Thank you.
-- Nor
Dear Nor,
Your question reminds me of Sunday dinner when I was a kid. My mother, Grace, was a great cook and I'd
often ask, "Can I have seconds?"
Her response was, "Of course you can, but may you?"
Can you pay less? Sure! But may you? Now that's the real issue.
According to the cardholder agreement you signed when you accepted the credit card from
the lender, the answer to your question is "No, you may not." You must make at least the minimum payment
due on your statement or you are violating the terms of the agreement.
When you make less than the minimum payment, the result is not pretty.
First, you are assessed a late fee, which is typically $30 or more per month. Also, expect
to move to a penalty interest rate status. Your new annual percentage rate will be in the high 20 percent to
mid-30 percent range.
Next, if you are close to the credit limit on your card, the late fee and additional interest
charges added to your balance may push you over your limit. And yes, you are correct -- another fee is added
to your account. This time, an over-the-limit fee of -- you guessed it -- $30 or more.
Next month, your minimum payment, which you couldn't afford to begin with, will go up to include
the late fee, the over-limit fee and the higher interest charges. This makes no sense from your perspective,
but it does from the lender's point of view. You are a higher risk and they need to be compensated for it.
I strongly suggest you do all you can to avoid paying less than the minimum due on your account.
Start by taking a look at your discretionary spending, like meals out or entertainment, and cut back enough to
try to cover your minimum payment.
You can also try to get some more income from a part-time job or by having a garage sale.
If you need a longer-term solution -- aside from cutting back on lattes or trips to your favorite
ice cream place -- call your credit card issuer and ask for a hardship program. You should expect to be asked
to document why you can't make your payment, what you are doing to correct the situation and how long you will
need a reduced payment.
Typically, good lenders will allow a three- to six-month hardship program to give you some breathing
room. It may be time to call in a professional if your financial situation has deteriorated to the point that it
will take longer to get back in financial shape.
I suggest a nonprofit credit-counseling agency that is a member of the
Association of Independent Consumer Credit Counseling Agencies.
You can call them at (866) 703-8787.
Or, try the National Foundation for Credit
Counseling, (800) 388-2227.
I prefer an agency that has been accredited by the
Council On Accreditation as well.
A credit counselor will review your finances and help you establish a workable budget for your
income level.
If you can be helped by a debt management plan, the counselor will work with your credit card
company to help get your interest rate lowered and/or a lower payment amount for a much longer period of time,
often minus all the fees.
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