Coming soon to your bill box, higher minimum payments on credit cards. Watch out, consumers. This could wreck your budget.

The Office of the Comptroller of the Currency in Washington confirmed it: Financial institutions are in the process of phasing in higher minimums in order to comply with federal guidelines issued in 2003.

Government regulators, with the OCC leading the charge, aren't happy with the way credit-card issuers have been easing minimum-payment requirements in recent years and stringing out consumer indebtedness for a longer time in order to make more money.

In some cases, minimum payments are composed only of interest, not principal. Pay that amount, and the debt never gets paid off. The regulatory agencies want credit-card minimums to cover interest, fees and a reasonable amount of principal, said OCC spokesman Dean DeBuck.

They want card balances to be amortized over a reasonable period of time.

The phase-in of minimum payments on credit cards has been under way for a while.

"Some have already done it," said DeBuck. "It's supposed to be all done by early next year."

Customers of MBNA Corp. of Delaware are either already seeing higher minimums or will be by year's end.

MBNA spokesman Jim Donahue said "customers who joined us as of the first of July would already be seeing these new minimum standards applied on their accounts." Pre-existing customers will begin seeing them as of Oct. 1. "They will be notified of those terms in their statements over the next month or so."

The company is a leading issuer of credit cards, including affinity cards for numerous organizations, from the National Football League to L.L. Bean. Last month, Bank of America Corp. announced that it would acquire MBNA, which would make Bank of America the largest credit-card issuer in the United States.

MBNA sets the terms of the cards it issues, Donahue said. Its current minimum balance formula is: Interest, plus any fees owed, plus $15, or 2¼ percent of the balance, whichever is less.

The new formula is: Interest, plus fees, plus 1 percent of the balance. The key difference is this requires a payment of at least 1 percent.

American Express, another major card issuer, has no plans "at this point" to raise minimums on its credit cards, said spokeswoman Desiree Fish in New York.

American Express' formula is the highest: 2 percent of the balance, the current finance charge, or $15, said Fish. The high amount is then added to any past due amount.

What impact will the minimum-payment increase have on consumers?

Good and bad.

"It's long-term benefit is undeniable," said Greg McBride, analyst for Bankrate.com in North Palm Beach, Fla. "It will help cardholders repay their credit card debt in a shorter period of time.

"But the initial pain is for cardholders currently struggling to make the current minimum payments," he said. "They will face an additional squeeze when those minimums begin to climb."

Brad Stroh, co-chief executive of Freedom Financial Network LLC., a San Mateo, Calif. debt-resolution firm, gave a hypothetical example of someone who would be hurt: A consumer who has a $20,000 balance on his or her credit card and pays a current minimum of $400 a month. With the increase, the person could wind up paying $800 a month.

How? If he or she is currently paying 2 percent of $20,000, that's $400, he said. If the card issuer boosts that minimum to 4 percent, they'd pay $800.

"A lot of people are no longer going to be able to meet their minimum payments," Stroh said. "The people who can't afford to meet those monthly payments are the ones who are really going to feel the pain. If you're living from paycheck to paycheck, it will be very difficult to make ends meet."

Does the OCC mandate increasing the minimum to 4 percent of the balance?

No, said DeBuck. "It has turned out, after lots of discussions back and forth, that a reasonable amount of principal seems to be about 1 percent."

But, that's only a guideline. Financial institutions are free to set their formula.

A consumer who has a very large balance, a high interest rate and makes only the smallest payments might see his or her minimum soar to 4 percent.

"All those factors [balance, interest, payments] would have to come into play," said Donahue. "This is going to be different for each customer."

Who might get hit hard? Multiple-card holders, because all their minimums will increase.

Who could get hit the worst? Multiple-card holders who are in a lot of debt and who live from paycheck to paycheck.

They may be headed for the poorhouse -- and this at a time when interest rates keep rising and bankruptcy protections are disappearing.

DeBuck said some institutions are saving their multiple-card-holding customers for last during the phase-in.

Many credit-card holders won't be affected at all: those who pay off their balances each month. Other consumers routinely pay more than the minimum.

The silver lining is that consumers will now get out of debt faster, "which allows them to accumulate savings faster and allows them to pay less in total interest and fees," said Stroh.

What will be the impact on credit-card issuers? It doesn't help them, said McBride.

"Raising the minimums reduces the time the balance is outstanding and reduces the interest earned by the issuer. The business of lending is you want to get paid back later rather than sooner as long as it doesn't increase the risk of default," McBride said.

"The second impact to credit issuers is that they may see increased delinquencies or defaults as the higher minimum payments go into effect."

What should you cardholders do now?

• Ask how your minimum payment is calculated. If you're paying interest only, start paying more than the minimum. Otherwise, your debt isn't budging.

• Monitor your monthly statements carefully. What you've currently budgeted for bill paying may be insufficient under the new minimum formula, said Donahue. Also, watch the mail for a notice regarding the increase.

• Accelerate your payments. Try to pay down your balance as much as possible now, suggested McBride. "That reduces the impact when the higher minimum payment takes effect."

• Now's a good time to shop for lower credit-card rates. "A lower-interest-rate card means that more of each dollar will be applied toward the balance and less toward interest," said McBride. Compare card rates at such Web sites as www.bankrate.com and www.cardratings.com.

Click here to go to Freedom Debt Relief's website