cancel
Showing results for 
Search instead for 
Did you mean: 

Changes to Discover minimum payment

tag
Anonymous
Not applicable

Changes to Discover minimum payment

Question please! Currently carrying a balance on my Discover card of around 8100. The minimum payment due each month is around $190 depending on whether I've used it that month or not. The interest charge going back several statements is typically around $170. I got a notice that the minimum payment due is changing to one of several things, but the one that will be mine is 2% of the New Balance. I just did a calc and figured that 2% of my balance is less than the typical amount of interest charged monthly. 2% is around $160. I thought the laws were changed within the last few years that said the minimum due had to be all the interest plus some amount of principal. Can someone help me understand what I'm missing here?

Message 1 of 7
6 REPLIES 6
Anonymous
Not applicable

Re: Changes to Discover minimum payment

I am not aware of any significant change in minimum payment guidelines issued by the Feds since 2003. The guidelines were broadly phrased basically requiring that a borrower would have to be able to pay down their debts in a reasonable period of time. Most of the FCRA changes since the latest recession generally dealt with areas other than minimum payments (other than requiring lenders to let you know how long your payoff will take with minimum payments and allocating all payments beyond the minimum payment to the highest APR balances first). 

 

Most lenders generally set minimum payments at a few tiers: 1) Minimum amount that is often $25 but ranges from $10-35 fairly often; 2) A percentage payment if over the minimum amount - often 2%, though sometimes different; and 3) A lower percentage payment plus interest and fees if greater than options 1 and 2 - often 1% plus interest and fees. While this is not always the case, most lenders have a minimum payment model that is roughly structured this way.

 

I think (not sure) that some law was discussed or went into effect some years ago to limit how much an issuer could raise minimum payments. Not sure if it actually went into effect, but the law's purpose was to combat issuers like Chase potentially raising minimum payments to 5% of the balance. Chase eventually did not follow through with the change to those with existing debt and I think the legislation fell through. 

 

 

 

Disclaimer: Basing some of my answer on what I have read and heard over the years. While I am confident about certain aspects, I am less sure about others. The third paragraph above might not be accurate. I did read some articles about the topic and reviewed some of the proposed legislation, but that was about 5 years ago. 

Message 2 of 7
juggalo9er
Valued Contributor

Re: Changes to Discover minimum payment

The fact that at this rate it will take years to Pay them off?
Message 3 of 7
Anonymous
Not applicable

Re: Changes to Discover minimum payment

The three you listed were pretty spot on. I've had various credit cards for about 20 years and I've never seen one where (if I'm understanding it correctly) that paying only the minimum would cause the balance to actually rise every month. I'm in the process of buying a house (in underwriting) so there's no way I'm going to do anything to attempt to change anything currently, but if I'm right and the balance starts rising, I'm going to have to figure something different out with that card for sure.

Message 4 of 7
Anonymous
Not applicable

Re: Changes to Discover minimum payment

Let's see, from Discover's site (because my account holder agreement has different terms than this and I haven't received an updated one at this time):

 

You may pay the entire New Balance shown on your billing statement at any time. Each billing period you must pay at least the Minimum Payment Due by the Payment Due Date shown on your billing statement. The Minimum Payment Due will be any amount past due plus the greater of:

    • $35; or
  • 2% of the New Balance shown on your billing statement; or
  • any Interest Charges and Late Fee shown on your billing statement, plus $20.

The Minimum Payment Due may also include amounts by which you exceed your Account credit line. It will never exceed the New Balance. When we calculate the Minimum Payment Due, we may subtract from the New Balance certain fees added to your Account during the billing period. The Minimum Payment Due is rounded up to the nearest dollar.

So it looks like whatever 2% of your balance is is the highest of those three amounts as listed, which means it should be higher than whatever interest you're being charged, otherwise it should be option #3.  Which means it should naturally be more than your interest charges each month.  If it isn't, perhaps a call in to Discover could help clear that up?

Message 5 of 7
Anonymous
Not applicable

Re: Changes to Discover minimum payment

After you posted I went back and re-read the message and you're right, its $20 + the interest charges. So basically, its going to be exactly the same as the current payment. I just read it wrong the first time. Thanks for the help everyone.

Message 6 of 7
Anonymous
Not applicable

Re: Changes to Discover minimum payment

Great discussion! Thanks.
Message 7 of 7
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.