Montreal

Heads up, Quebec credit card holders — your minimum payments are going up

The province will require banks to set the minimum payment at two per cent of the balance owing starting Aug. 1. That percentage is supposed to increase every year until it gets to five per cent.

Bill 134, passed in 2017, will eventually increase minimum payments to five per cent of balance owing

Starting Aug. 1, banks in Quebec will be required to set the minimum payment at two per cent of the balancing owing. (Ryan Remiorz/The Canadian Press)

If you are a credit card holder in Quebec, there are some changes coming to your minimum payments — and they aren't getting cheaper.

Under Bill 134, a provincial law passed in 2017, banks will be required to set the minimum payment at two per cent of the balance owing starting Aug. 1. That percentage is supposed to increase every year until it gets to five per cent. 

However, companies aren't required to phase in the change over time — some may choose to increase that payment to five per cent right away. New credit card accounts will start at the five per cent mark.

The changes are meant to help curtail practices that weaken people's financial health, the government said in a news release when the bill was passed.

But Marc Griffin, a Montrealer with four credit cards, says the change is going to make a big difference when it comes to his debt management.

He said he plans to use his savings to pay down his cards and get a line of credit.

"I'm going to do a bit of juggling to get things paid off, but I don't think everyone has the options I have."

Griffin has one card where his payments are going from $37 per month to $182 per month. Overall, he said, he will spend $240 more on credit card payments.

He contacted each credit card company separately to inform himself of the changes.

Griffin said he uses the avalanche method to pay off his debts — he pays the minimum on his credit cards with the lowest interest rates, and puts the rest of his available money on his high-interest cards.

But when the changes come into effect, he told CBC Montreal's Daybreak he won't be able to do that anymore.

Griffin said he didn't learn anything about finances until he was in his 30s, and he wants to see financial education start in high school.

"I had to educate myself. I think that if I had had those tools earlier, I wouldn't have been making the mistakes that I did."

Marc Griffin said he received a letter from one of his credit card companies in May that made him look up the forthcoming changes to minimum payments. (Submitted by Marc Griffin)

Helpful in the long run

Élise Thériault, a lawyer and budget consultant with non-profit group Option consommateurs, said her group believes this law will help consumers in the long run.

She gave an example, based on someone who owes $1,000 on 19.9 per cent interest rate credit card. If they pay a two per cent minimum payment and make no new purchases, it will take 26 years and four months to them repay it, and they will pay $3,000 in interest.

But if they pay a five per cent minimum payment, the same amount will take six years to repay, and it will cost only $445 in interest payments.

She said the group is happy some banks decided to implement a bigger increase right away, since it's not in a bank's interest to do that because the lower the minimum payment, the more they make in interest payments.

She said she knows the change will affect people who are having financial difficulties.

"But our opinion was always that if you already have difficulties paying your minimum payment, and if a small increase like that is going to hurt you and hurt your finances … you need to meet with a budget consultant as soon as possible."

Starting August 1, Quebec will require banks to set the minimum payment at two per cent of the balancing owing starting Aug. 1. That percentage is supposed to increase every year until it gets to five per cent. We speak to a Montrealer who's concerned about these changes, and a consultant with Option Consommateur. 13:47

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