Why are credit card companies SO in favor of bankruptcy reform? It protects their cash cow.
On a credit card @ 18%, paying on the minimum payment:
A $2,000 balance will take 18.50 years to pay off
A $4,000 balance will take 24.25 years to pay off
A $6,000 balance will take 27.50 years to pay off
A $10,000 balance will take 37.75 years to pay off.
But do you know how long it takes for the credit card company to get back what it loaned?
51 months.....no matter how much you borrowed.
That means after 51 months of carrying a balance on the credit card, every penny paid to the credit card companies for as long as 33 years, is profit.
At 24%, it would take only 45 months to get back the balance but to pay off?
$2,000 would take 33.5 yrs
$4,000 would take 45.17 yrs
$6,000 would take 51.75 yrs and
$10,000 would take 60.25 yrs
ONE $6,000 credit card with a full balance would take someone their ENTIRE working life to pay off at the minimum payment. If the credit card companies have their way, the new law will make anyone with $100 a month extra repay their $6000 in ....5 years.
Let's make this easy. Instead of allowing credit card companies to structure their repayment plans over 30, 40 or 60 years, require them to schedule minimum payments based on the highest balance ever held.
$2,000 highest balance @ 24% would be $40
$4,000 highest balance @ 24% would be $80
$6,000 highest balance @ 24% would be $120
$10,000 highest balance @ 24% would be $200
In each case, the balance would be paid off in just 5 years....just like in bankruptcy....
Bet they will not like it...MBNA, the largest issuer of credit cards earns almost a billion dollars a year PROFIT.....cash cow indeed.