Credit cards take bigger bites now Users who keep high balances may be hit hard in coming bill

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The new year is bringing with it bad news for an untold number of Americans mired in credit-card debt.

Many of the banks that issue credit cards are raising their minimum required monthly payments this month—in some cases doubling them—as a result of pressure from federal regulators worried about U.S. consumers’ deepening debt and its potential effect on the financial system.

Though some banks began phasing in higher minimum payments as long as two years ago, when the Office of the Comptroller of the Currency first raised the issue, as much as 50 percent of the industry just made the change.

That means the higher minimums will show up for the first time on many people’s January card statements—in the middle of what for many is a post-holiday credit hangover.

"To some people, that may not seem like much, but when you don’t have a lot, an extra $100 a month is going to put a big strain" on your budget, said Michelle Smith, 39, a mother of three in St. Cloud who is wrestling with about $3,500 in debt on three cards. "I try to pay a little more than the minimum, but I don’t ever pay double. I use the money for things like car repairs, gas, groceries and other household needs."

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Bank of America notified its customers in October that its change in the minimum required payment was effective Dec. 1. The new minimum is at least 1 percent of the cardholder’s monthly balance plus any fees and finance charges. The old minimum payment was only $10 plus fees and finance charges.

Many other banks used to require a $15 minimum payment or 2 percent of the account’s balance—whichever was less.

Post-holiday hit

Consumer-finance experts have long encouraged people to avoid making just the minimum payment on a credit-card balance, because it can mean paying thousands of dollars in extra interest. But they are also worried that a sudden demand for larger payments could break many cash-strapped Americans who have come to rely on the historically low minimums of recent years.

"Sure, the idea is that people will pay down their debt quicker and save money," said Doug Neway, a consumer-bankruptcy lawyer in Orlando. "But it’s a shame that this is happening to people now, with all their holiday spending reflected in the January bill. It will be the highest [balance] most will have all year long."

It’s not clear how many Americans with credit-card debt pay only the minimum monthly payment. Estimates range from as low as 4 percent, according to the American Bankers Association, to as high as 45 percent, according to a survey by the Cambridge Consumer Credit Index.

Millions just pay minimum

About 167 million Americans have at least one credit card, according to the Nilson Report, an industry newsletter. By that measure, 6 million to 75 million cardholders are paying the required minimum or close to it.

Bankers say the effect of the larger minimum payments has been overstated by some consumer advocates.