Currently, most people’s minimum payments on their credit cards are generally around 2% of the outstanding balance. But the government has given a directive to credit card companies to raise the minimum payment to around 4%. For some, this could be good news as well as bad news.

Having a low minimum payment means you can borrow more money. But it also means some people are in deeper debt because they spent more. Some people still only pay the minimum amount which takes longer to pay off the debt accrued.

This is why the government is compelling credit card companies to up the minimum payment. They are trying to make sure that all the interest, fees, and principal are covered.

It’s good news for those who can handle the increased minimum payment. The more you pay, the faster you get out of debt. And the faster you get out of debt, the less interest you pay over time. But it could also be difficult for some people because they’re stretched financially and need to rely on their credit cards for day-to-day expenses.

There is relief, however. These days, lender programs that allow you to use your home equity to get out of debt are growing in popularity and in flexibility. And don’t forget that if you borrow against your home equity, the interest you pay on that loan is usually tax-deductible.* You get the advantage of turning your “bad debt” into “good debt”–you get rid of your non-tax-deductible debt from high-interest credit cards and other unsecured debts and trade it for tax-deductibility.

Of course, you may decide not to pay off your debts this way and ultimately, it’s up to you to decide what’s best for your own situation. But it’s always good to be aware that there are other options out there for you.

*As always, please consult your tax advisor.

Related posts:

1. Get a Home Equity Credit Card
2. Behind on Debt Payments? You Have Options
3. Don’t Use Your Credit Cards This Holiday Season

Tags: Bad Debt, Credit Card Debt, Good Debt, Home Equity Debt, Income Tax Deduction, Income Tax Deductions, Paying Off Debt