|by Jason Steele|
Ever since the implementation of the CARD Act, people have been complain that credit card payment options are too confusing and restrictive. Minimum payments have been raised to the point where many are unable to pay their minimum balances. Today, Visa has broken new ground with an alternative to the hated minimum payment and the confusing charts that try to explain when debts will be paid off.
How This Will Work
The new payment system is based on the experience that many popular musicians have had with voluntary payments. When card holders get their bill, they will see their balance, but there will be no minimum payment listed. Customers will then pay what they feel like, based on their own estimates of their ability to pay.
This system offers several advantages. First, it is expected that Visa will see delinquency rates plummet among cardholders who opt for this novel payment plan. Without a minimum payment, it will actually be impossible to miss a payment or default. Reducing delinquency rates is seen as the key to boosting investor confidence in Visa and ultimately helping its stock price.
By accepting the new plan, customers will have to agree to make their credit card debts transferable to future generations. In this way, Visa can continue to charge interest and fees on unpaid balances with the knowledge that the cardholder’s descendants will be responsible for the debt. In this aspect, the new plan more closely resemble the long term budget strategy of the federal government.
Overall, Visa claims that the response has been favorable. Unemployed customers are especially excited about the chance to continue to use their credit cards in the absence of any means to repay their debts. Another group of customers who are expected to adopt this new payment system are those who have taken out multiple pay day loans in order to pay their minimum balances. Consumer advocates are optimistic that they will now be able to break the cycle of predatory lending by just charging their purchases to credit cards that do not have monthly payments. Without the burden of compulsory repayment, these people will have new opportunities to make important purchases such as lottery tickets and furniture rentals.
It is difficult to see how a system like this can have any drawbacks. By delaying repayment of debt until the time that it is convenient for customers, banks will see their stock soar in the short term, while customers can break free from their cycle of debt. In the past, making the minimum payment has been a real challenge for so many that carry a balance, but now that will not be a concern. Industry analysts predict that Visa’s success will spur their competitors to quickly create similar payment avoidance systems. It is my prediction that we will look back on today, April 1st, as the day that Americans finally found a practical way to manage their credit card debt.