The increase in the percentage required for the minimum payment on credit cards in Quebec, effective Monday, is intended in particular to reduce household debt.
• Read also: The minimum payment on your credit card will be higher as of Monday
By making a higher minimum payment, consumers should pay less interest since the balance will decrease more quickly.
The high interest rates on these credit cards, which are normally between 19.99% and 22.99%, mean that it takes several years to pay off the full balance.
But if the percentage of the minimum payment increases from 3% to 3.5%, the number of years required to make the repayment will decrease significantly.
So here’s how many years it will now take to pay off a credit card balance in full at a rate of 19.99% and making a monthly minimum payment of 3.5%:
– Balance of 1000$ : 8 years and 11 months
– Balance of 5000$ : 16 years and 2 months
– Balance of 10 000$ : 19 years and 4 months
– Balance of 20 000$ : 22 years and 5 months
–Source: Financial Consumer Agency of Canada
Here’s how many years it took to pay off a credit card balance in full at a rate of 19.99%, but making a minimum monthly payment of 3%:
– Balance of 1000$ : 10 years and 11 months
– Balance of 5000$ : 20 years and 2 months
– Balance of 10 000$ : 25 years and 3 months
– Balance of 20 000$ : 29 years and 6 months
–Source: Financial Consumer Agency of Canada