Chase boosts minimum payments on some credit cards

Chase is increasing the minimum payment on some credit card accounts from 2 percent of the balance to 5 percent. This angers cardholder Sonja Young of Portland who says the move will hurt people on tight budgets. But it's also potentially a good thing. Industry analysts explain why Chase is doing it. Chase spokeswoman Stephanie Jacobson said the increase takes effect August 2009 on "select accounts that have carried balances." It boosted the payment, in part, to "protect our customers and our company."

Young, notified of the change recently, emailed this analysis:

Young, a family-studies instructor at Portland State University and a massage therapist, said the increase would have been enough to push her above the debt-to-income ratio that qualified herself and her husband for a loan to buy a new home.

Two key factors likely figured into Chase's decision, experts say. Young said she has not used the card in more than a year and makes payments above her minimum each month. She also has a lifetime fixed rate of 3.9 percent on the card.

The latter fact evoked a hearty laugh out of Bruce Cundiff, a credit industry analyst with Javelin Strategy and Research, when asked for Chase's motives behind this move. "Well there you go," he said. "They're not making that much money off that card anymore.

John Ulzheimer, president of consumer education for credit.com, said other card issuers are making similar moves -- cutting lines of credit, increasing interest rates or closing accounts altogether -- to either improve cash flow, fend off future defaults or shed customers that don't make them money. These companies also have a deadline.

"The reason they're doing it now is because as of February next year, it's going to be much more difficult to make these changes because of the new (credit card reform) law" passed by Congress in May, Ulzheimer said. "They're in a housekeeping mode right now.

Banks are losing money on their card operations, too, reports MoneyRates blog. Said Cundiff: "From a profitability standpoint, they've got to get these people off their books as soon as possible, especially the inactive ones."

"This cardholder shouldn't take it personally," Ulzheimer added. "They're among a huge crowd of other cardholders that have seen their terms adversely changed over the last 12 to 24 months."

Young

is

taking it personally: She plans to switch providers once she's paid off her Chase card. "They will lose thousands of dollars from me and from others like me."

That's probably a risk, Ulzheimer said, Chase has figured it can take.

It's also another reminder that having no revolving credit card debt gives you a lot more freedom.

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