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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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From: Elroy Jetson	7/20/2005 8:12:16 PM
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The new new Minimum Payments on credit cards mandated by the Fed will be significant for some. The Fed is requiring banks to adjust Minimum Payments to allow loan repayment in a "reasonable" period of time. As of December 1, 2005, MBNA (which will be part of Bank of America by the end of the year) is changing their Minimum Payment calculation from: $15, plus all interest and fees, ---- to 1% of the Balance, plus all interest and fees. -> With a Balance of $25,000 at 10% interest --- the Minimum Payment rises 342% from $97.19 to $332.19. -> With a Balance of $25,000 at 20% interest --- the Minimum Payment rises 231% from $179.38 to $414.38. Using the original Minimum Payment, MBNA's "reasonable" repayment time will be 100 years, or 380 years if each month's new Minimum Payment is used. This new "reasonable" 100 year repayment period is considerably shorter than the existing repayment period of 1,667 years. .

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