## 18 February 2006

### New plastic binding

Washington Mutual, the new owner of the Providian credit-card operation, has, like other card issuers, come up with new terms to increase the monthly payments in the interest of greater debt reduction. But WaMu's tactics are different. They're not going to a percentage-plus-new charges system like rival banks, but will vary the percentage based upon the cardholder's interest rate: if you're paying a higher rate, you're also going to pay a higher minimum.

Under the new WaMu scheme, if your Weighted Average APR is less than 12 percent, your monthly minimum is 2 percent of the account balance, period. (In this case, a hundred bucks.) This APR, of course, tends to increase, since payments are applied to the balance at the lower interest rate first. Up to 18 percent, you'd pay 2.5 percent of the balance, and it goes up from there; the poor souls who are paying over 30 percent get to fork out 4 percent each month.

Depending on individual circumstances, this can be either easier or harsher on the customer: for me, it represents no change at all. And unless I'm really in a bind, I never, ever pay just the minimum if I have a balance.

Doing the math: If you owe, for example, \$2000 at 14 percent and \$3000 on a balance transfer at 8 percent, your Weighted Average APR is ([2000 x .14] + [3000 x .08])/5000 = 10.4 percent.

Posted at 5:45 PM to Common Cents