Credit card poll - January 2009

Have any of these actions been taken by your credit card provider this year?

• Credit Card Account Closed (22.9%)
• Credit Limit Lowered (38.4%)
• Credit Limit Increased (28.0%)
• Interest Rate Increased (54.9%)
• Interest Rate Lowered (12.4%)
• Some Fees Raised (22.8%)
• Some Fees Reduced (2.1%)
• New Fees Added (14.3%)
• Rewards Program Changed (11.5%)
• Other Changes Raising Costs (6.8%)

Source: CardTrak.com

Credit card interest rates - January 2009

Average annual credit card interest rates in January, 2009 according to CardTrak.com

	Jan 2009	July 2008	Jan 2008
Promotional:	1.60%	2.01%	2.70%
Super-Prime:	8.46%	9.83%	10.95%
Prime:	12.94%	14.09%	15.46%
Sub-Prime:	20.02%	20.94%	22.78%
Punitive:	27.99%	29.08	30.16%

Note: Average Rates based on FICO Credit Scores.
Super-Prime = 760-850; Prime = 660-759; Sub-Prime = 500-659.
Source: CardTrak.com

Minimum payments - general concepts

The minimum monthly payment required by your credit card company almost universally includes all outstanding interest charges, fees, and penalties. In addition, a fraction of the principal loan balance is included in the minimum payment. The amount of principal re-payment required differs from one credit card company to the next.

Components of monthly payment:

1. Interest - this includes all fees and penalties
   
2. Principal

Ten years ago it was common practice that 5% of the balance be paid every month. As of 2009, however, the amount may be as little as 1%.

Five percent solution:

This top chart shows the rate of decline in the loan balance over time when 5% of the principle is included in the monthly payment, at a 12% annual rate of interest. On an initial loan of $1000.00 the balance is paid down to less than $200 in about 28 months, and the total interest paid for the loan is about $165.00.


One percent solution:

The bottom chart shows the rate of decline in the loan balance over time when only 1% of the principle is included in the monthly payment, at a 12% annual rate of interest. On the same $1000.00 loan, it takes nearly 81 months for the balance to be paid down below $200. At that point in time the cardholder has paid nearly $400 in interest.



See also: Credit card minimum payments

First debt collection letter - Example 1

I. C. SYSTEM, INC.
444 Highway 96 East, P.O. Box 64887
St. Paul, MN 55164-0887
Phone: 1-866-903-1001
MON-THU 7A-10P
FRI-SUN 7A-9P
CENTRAL TIME

December 30, 2008

RE:

Washington Mutual
Balance as of December 30, 2008: $7,605.86
Account No: xxxxxxxx-xxx-xxx-xxx
File Number: xxxxxxxxxxxxxxxx

Dear _______________:

Your account is past due and has been referred by Washington Mutual to our agency for collection. The balance shown above is the amount due as of the date of this letter. This amount may change due to interest or other charges that may be added to the account after the date of this letter.

This is a serious matter! If you respond, you may be able to avoid any further contact from us.

Call us at 1-866-903-1001 if you wish to pay this account, but need to make payment arrangements. We want to give you the opportunity to resolve this debt.

Make your check or money order payable to Washington Mutual and send it to:

Washington Mutual Payment Processing
PO Box 660548
Dallas, TX 75266-0548

We are a debt collector attempting to collect a debt and any information obtained will be used for that purpose.

Sincerely,

Beth

NOTICE

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice that you dispute the validity of this debt or any portion thereof, this office will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification. If you request of this office in writing within 30 days after receiving this notice this office will provide you with the name and address of the original creditor, if different from the current creditor.


Telephone calls to or from our General Office are randomly monitored by supervisory personnel for business reasons not directly related to your account. Calls may be recorded for quality assurance.