If you live in Quebec, as of August 1st, 2019, your credit card minimum payment will be increasing.
For newly issued credit cards, the minimum monthly payment will be 5% of the outstanding balance. For cards already issued when this requirement comes into effect, the minimum payment (if less than 5%) will be gradually increased to 5% over a six-year transitional period.
The good news
This actually isn’t bad news. According to the Financial Consumer Agency of Canada, most credit cards require you to pay 3% of your outstanding balance each month. So, the current 2% on Quebec cards should actually be higher. And, if you’re only paying your minimum payment, that’s a huge red flag.
The high costs of paying the minimum
The Office de la protection du consonnateur posted a calculator online to help you see how much only paying your minimum payment can cost you.
For example, a balance of $1,000 on a credit card with an annual credit rate of 19.9 per cent would see a consumer paying the monthly minimum require 25 years and 10 months to pay off that balance — and pay $3,001.40 in credit payments while doing so.
In trouble? Get help!
The Canadian Banker’s Association reports that the majority of consumers (58%) pay their credit card off in full each month. So for most, this change won’t affect them. However, if you find yourself struggling to pay your card off or worse, just maintaining the minimum, it may be time to reach out for help.
Look for a non-profit credit counsellor in your area to assist you in setting up a debt repayment plan. You can also call up your bank or credit card company and see if they offer a lower interest rate option. Or, inquire about a consolidation loan that will provide you with a much lower interest rate and force you to make greater principal payments, thus getting the debt paid much sooner.