Comments on: Your Minimum Payments Influence Your Debt Repayment

By: Link Roundup: Quilt patterns edition | Mighty Bargain Hunter

Link Roundup: Quilt patterns edition | Mighty Bargain Hunter — Tue, 18 Nov 2008 04:36:34 +0000

[...] Micah talks about anchoring as it applies to credit card minimum [...]

By: Interesting Reads From Fellow Personal Finance Bloggers #11 | Pecuniarities

Interesting Reads From Fellow Personal Finance Bloggers #11 | Pecuniarities — Mon, 17 Nov 2008 13:03:12 +0000

[...] Micah at Finance for a Freelance Life warns how minimum payments slow down debt repayment. I fully agree; when I got my first credit card, I was surprised at how low the minimum payment was [...]

By: poor boomer

poor boomer — Sun, 16 Nov 2008 03:44:23 +0000

My minimum income influences my debt repayment.

By: Weekly Round Up: Goodwill Edition — Green Panda Treehouse

Weekly Round Up: Goodwill Edition — Green Panda Treehouse — Sat, 15 Nov 2008 23:05:33 +0000

[...] Your Minimum Payments Influence Your Debt Repayment [...]

By: mrsmicah

mrsmicah — Sat, 15 Nov 2008 19:56:25 +0000

@Kate, I think it probably has some affect on how people repay fixed loans, but it’s probably not as strong. Credit card interest is higher and payback period is infinite. Whereas with other loans people have a slightly better idea of the time frame and payment structure.

I think it’s not predatory because it is necessary for them to set a minimum payment (or no one would pay it back). That’s a similarity that credit cards have to any other loans. They just stand to profit more from lower payments because people are always paying it off.

By: Kate

Kate — Sat, 15 Nov 2008 19:06:36 +0000

I have never been more glad that I do not use my CC that often. Off hand (and this may be a dumb question) do you know if the same theory applies to student loans or car loans. I would tend to think not with the car loan, because that is a secured debt, but I may be wrong.

Also, why is it that the mental manipulations by the credit card companies are not considered predatory lending?

By: Dad

Dad — Thu, 13 Nov 2008 03:47:49 +0000

Credit cards are good only for people who can management responsibly for their own good. They can be a great convenience. But they can be a great temptation. People who get debt counselling are often told to cut up all their cards because they have demonstrated that they can’t handle them. That may be extreme but it may be the best answer for many people. If you have a credit card you need a plan for what you are going to do with it. Will you use it frequently or will you use it only for certain things? In most cases, you should plan on paying it off every month. There may be exceptions to that but I would examines these ‘exceptions’ with great suspicion and get advice from someone you respect in financial matters before you make that decision. I use my rather frequently for many kinds of purchases but I keep an idea on how much the balance is running and I work to be sure I’m not spending just because the card makes it easy. The ease of overspending is rather dangerous. Can you handle that? I also check the balance and transactions frequently to be sure I’m within budget. I am very careful not to buy what I hadn’t already decided I was going to spend and which is already in my budget. Your plan or regimen may be different but you need one, you need to stick with it and it must fit you means and your budget.

By: chica with issues

chica with issues — Wed, 12 Nov 2008 21:47:19 +0000

wow, interesting experiment.

By: Michael

Michael — Wed, 12 Nov 2008 20:34:44 +0000

Others set our expectations with numbers so easily…

By: Miranda

Miranda — Wed, 12 Nov 2008 13:43:19 +0000

You’ve hit the nail on the head. The whole point is to have us be in JUST enough debt that we can keep making payments (the longer we’re making them, the better), without tipping us over the edge. Indeed, that’s what our entire economy has been build upon: consumers being in debt. Unfortunately, we’re finding out that such a model may not be sustainable in the long run, because eventually a tipping point is reached.