Credit card companies at it again!

If you were wondering why not a lot of people feel sorry for credit card issuers, and their problems with individuals filing for bankruptcy on their accounts, look no further than the companies latest attempt to get around reform legislation.

A law that went into effect earlier this year requires credit card companies to credit certain payments to the balances with the highest rates first — a boon for consumers, since prior to the legislation, they universally did the exact opposite, and credited payments against “teaser” rates first.

However, the credit card companies have discovered a loophole in the new law — the term “above the minimum.” Syndicated columnist Candace Choi reports that the credit card companies are interpreting this to mean that minimum payments will only be applied to low interest rate balances.

Say you have a $10,000 balance on a credit card, half at an interest rat of 24%, and the other half at 12%, with a monthly minimum payment of $300. If you mail in a payment of $350, the card issuer may invoke the loophole and apply only $50 to the 24% balance and the remaining $300 to the 12% balance.

Although it’s legal, the practice undermines the spirit of the credit card reforms, notes Odysseas Papadimitriou, CEO of

“Why should any part of a payment be applied in an unfair way, especially for people who can only afford to make the minimum payment?” said Papadimitriou.

If you are having priblems making the monthly minimum payments on your credit cards, a chapter 7 bankruptcy case may be an effective solution. You can start the process by giving me a call at (978) 975-2608.


By Doug Beaton

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