Setting the Records Straight

Myth: Christy Costello of Atlanta asked, "I heard recently that when the new bankruptcy law goes into effect in October, our credit card minimum payments will double. I admit to being farther in credit card debt than I would like but far enough removed from bankruptcy, so I have not followed this story as closely as perhaps I should have. Is there any truth to this rumor?"

Financial Fact: There is some truth in that rumor. Credit card companies have been raising the minimum payment consumers have to pay on their balances.

For years the minimum payment on credit balances has been about 2 percent. That is changing, but not as a result of the new bankruptcy law that will take effect Oct. 17.

Instead, the hike in credit card minimums is the result of action from the Office of the Comptroller of the Currency, which has become concerned that people's minimum payments failed to cover the costs of fees and interest and thus kept them deep in debt. The OCC was so concerned about what it called unfair or deceptive credit card offers that it issued an advisory letter warning national banks about certain credit card marketing and account-management practices.

Your minimum payment will depend on your credit card company, although some people have seen it rise to as much as 4 percent.

The new bankruptcy law requires card companies to print a warning to customers that paying only the minimum increases the interest and time it takes for them to pay off their debt.

Are you wondering if what a so-called financial expert told you is true? Do you have a co-worker who thinks he knows everything about personal finance and you want to confirm his advice? Send me any "Money Myths" that you want help dispelling. Drop me a line at colorofmoney@washpost.com. Put "Money Myth" in the subject line.

You are welcome to e-mail comments and questions to singletarym@washpost.com. They may be used in a future column or newsletter with the writer's name unless otherwise requested.