Credit cards getting costlier: banks to double minimum payment fees within a year.

If credit card debt has you struggling to make the minimum payments, brace yourself for more hardship. Credit-card-issuing banks have begun increasing the minimum amounts due in order to comply with federal regulations.

The increase will vary from bank to bank as will the implementation date, but some consumers carrying a lot of debt with high interest rates, could even see their minimum payments double.

"This will put more stress and more pressure on people like me who are trying to pay off debt," says Torrence Wimbish, of Lanham, Maryland. "You'll pay the credit card off quicker, but it doesn't do anything about the stress that comes with wondering where the money will come from."

The minimum fee hike stems from guidelines issued in 2003 by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision. Under the regulations, banks must make sure minimum payments are calculated to ensure consumers will pay off some of the loan's principal each month in addition to finance charges and other tees. In the past, minimum payments did not have to make a dent in the principal at all, and, in cases where consumers have a high interest rate, one could find his or her credit card debt growing while making minimum payments.

"We didn't think it was in the best interest of consumers to make minimum payments but have their balance grow every month," says Kevin Mukri, a spokesman with the Office of the Comptroller of the Currency. "Hopefully, consumers are pleased with the fact that they know that if they make the minimum payments now, they're going to pay off that loan at some point."

Citigroup, for example, will institute a new minimum payment calculation for its Citi Card cardholders to ensure that consumers pay all finance charges and late fees incurred the previous month on top of 1% of the total balance on the card. Under the old minimum payment formula, the company only asked for one-fortyeighth of the balance, according to Janis Tarter, a spokeswoman for Citigroup.

While the minimum payment increase will get consumers out of debt faster, many fear it will also push debt-strapped individuals closer to bankruptcy.

Even those paying more than the minimum will have less of a cushion since they will be obligated to pay the higher amounts every month.

Credit card company executives point out that the increases won't cause drastic changes for the majority of cardholders, who already pay more than the minimum due.

"In our case, nearly all of our customers already pay more than the minimum every month," says Jim Donahue, a spokesman for MBNA America.

However, one in four Americans makes only the minimum payments, according to CardWeb.com, and for those people, the increase will be painful.

De'Lante Rawls, chief executive officer of Washington, D.C.-based financial consulting firm Tyger Insurance & Financial Services, acknowledges that in the long run, the increase will get consumers out of debt faster provided they can make the payments. He advises consumers who are having difficulties doing so to get creative.

"Maybe you can't go to a movie this week," he says. "Or instead of charging a pair of shoes you don't need, wait until you have the money or maybe use the money you would have spent on the shoes to add more to paying down your debt." For more tips, read "Save Now for Later" in our June 2005 issue.

MANAGING THE INCREASE

If you find yourself struggling to make the new minimum payments, consider these strategies:

* Slash your spending. Find ways to cut expenditures, such as going to the library instead of Barnes & Noble and taking your lunch to work.

* Dip into savings. If you have money making 1% interest in a savings account use some of it to lower your debt.

* Find additional income. A part-time job could help you get the payments under control.

* Negotiate with your credit card company. If you can't afford the increase, don't just throw up your hands in despair. Call your credit card company and ask for a lower interest rate, which will lower the payments.--T.E.H.