There is more bad news on the credit card front. Today, Chase Bank announced it will be charging a $10-a-month, or $120-a-year, fee. Ouch. This fee is especially nasty because Chase is adding it to borrowers’ monthly balances, and it will accrue interest. The bank is also raising the minimum payments on these accounts to 5% from 2%, more than doubling what is due each month. “The change affects consumers with low promotional rates who have carried a large balance for more than two years and made little progress paying it off”, says Chase spokeswoman Stephanie Jacobson. Chase is giving consumers a choice: pay the higher minimum payment plus fee, or accept a higher interest rate.
If you have the cash, pay it off and close the card. If you cannot pay off the balance, you will have to crunch your own numbers and assess your own financial situation to figure out which one to accept. If the increase in the monthly fee is more than you can afford to pay, then you might have to accept a higher interest rate, depending on how high it is. If you have credit available at a reasonable interest rate on another card, you may want to transfer the balance.
If you must use a temporary fix (like a balance transfer), then it is time to seriously figure out how to get out of credit card debt. Find a way to earn some extra money and apply it to your credit card balance. In addition, find a way to save some extra money: cut back on your utilities, cell phone, cable TV service, computer service, food bill etc., and apply it to your credit card balance. If the government stimulus puts some extra money in your paycheck-lower withholding and/or $300 to social security recipients are two items that may be included- apply it to your credit card balance.
Even if you do not have a Chase card, if you are carrying a balance on a credit card, pay it off as fast as you can. It is a good bet that other credit card issuers will be doing the same or worse as the bank losses accelerate.