Get ready for higher credit card payments

If you carry a balance on your credit card, your minimum monthly payment is about to double.

Yes, it may be painful. But it also may be a good thing.

Mike Peterson, vice president of American Credit Foundation in Midvale, tipped me off last week to a recent call for change from the U.S. Office of the Comptroller of the Currency, which has decided that the 115 million Americans who have credit card debt need help.

Toward that end, the OCC is asking credit card companies to double their customers' minimum monthly payments from an average of 2 percent of the total balance to 4 percent of the total.

"The OCC had made a very strong recommendation about two years ago that credit card agencies should be doing this, but they left it at that and didn't give any guidance or time frame," Mike says.

"It's just been over probably the last few months when the OCC has said, 'Look, we're serious about this, and we want to make sure that it takes place, so we're going to make it effective before the end of this year.' What's now happening is a lot of the big agencies are starting to roll out with statements that are going to be hitting this month with the change on it."

The switch should be fully implemented with most companies by December, he says, so those Christmas purchases you're planning to put on plastic will cost you more, sooner.

All of this probably sounds bad to the average holder of credit card debt. I already pay more than my minimum each month, but I was still a bit worried when Mike told me about this change.

However, he says, the change will be positive in the long run.

"The bottom line is, they're going to pay their debt off quicker," Mike says. "No longer are they going to be paying a very small minimum monthly payment and not ever getting ahead on their balance. This is going to be a massive change to that and literally have people getting out of debt, on average, in about half the amount of time paying on those minimums."

For example, Mike says Cardweb.com indicates the average credit card holder has about $9,200 in plastic debt. At the current monthly minimum, with a 15 percent interest rate, that will take approximately 39 years and $14,800 in interest to pay off. With the new minimums, that debt will be paid off in just 13 years with $4,120 in interest.