New credit card measures coming into place on Sept.1 will make clear the exact time frame and cost of only paying off the minimum payment at the end of every month.
About 30 per cent of Canadians run a balance on their credit card at the end of every month, and the new bills are intended to show the true cost of borrowing.
For example, a new bill with a balance of $500 with a 19.5 per cent interest would have to show that it would take 10 years and five months to pay off, if only the minimum payment of $15 was made each month.
The total cost would end up being $938.55, almost double the original purchase.
Jeff Schwartz of Consolidated Credit says just a small increase from the minimum payment can mean big savings.
"If you fix your monthly payment and add on the price of a latte, it's going to dramatically change the time and the price that you pay," he told CTV's Canada AM.
Using the same example, adding $5 a month to the minimum payment of $15 would mean it would take only two years and eight months to pay off, for a total cost of $640.00.
Among the new measures:
- Credit card companies have to provide 90 days notice of any new fees or rate increases
- Credit card holders must give their permission for credit limit increases.
Schwartz said the new measures "go a long way towards educating consumers about what their responsibilities are."
Finance Minister Jim Flaherty announced the voluntary changes in April, telling debit and credit card companies to accept the changes or face new regulations.
