Chase Increases Minimum Payments to $25 or Greater |
By Kenneth Long on February 1, 2011
 Chase started a firestorm in 2008 when it increased the minimum payments on some accounts from 2% of the balance to 5%. This time the change should be much less noticable, since it only substantially affects cardholders with smaller balances.
Beginning March 15, 2011, Chase minimum payments will be calculated with an absolute minimum of $25 on credit card accounts. Previously, minimum payments on smaller balances could drop to as little as $10. The higher floor will result in accelerated payoff for cards carrying just a few hundred dollars as a balance.
For everyone else, you can expect to pay 1% of your balance plus interest and late fees billed on that statement. That means that you can expect your balance to drop by at least 1% every month that you remain current on your account. A lower balance will also result in a lower minimum payment of approximately 1% the following month. Of course these assumptions are only true if you avoid new charges on your card while you are paying it off.
The minimum payment calculation is in line with what other card issuers are using, which is reinforced by regulatory "suggestion." The difference of course is an escalation in how fast low balance cards are repaid.
Chase is actually well justified to make the change. Considering how much it costs to open an envelope and process a paper check, a $10 payment could net just $9 for the card issuer. By increasing this minimum requirement, Chase is reducing its payment processing costs. This reduction in the cost of doing business could in theory lead to lower costs being passed down to Chase customers. Since these costs are largely determined by a semi-competitive marketplace, the real winners will likely be Chase shareholders. Still, cardholders that drag out repayment of debt may find that they repay their balances much faster with the new requirements.
For cardholders unable to afford their current monthly payments, Chase provides assistance to those who are approved for benefits through a debt management program. Sometimes the reduction in interest allows for a monthly payment low enough even for tight budgets, allowing you to stay current, avoid falling behind and eliminate the debt over a few short years. Credit counseling can help you decide if a debt management program is a good fit. For those looking for an even shorter shortcut, understand that Chase does not work with debt settlement companies.
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