Over the past few years, low minimum payback rates of between 2 and 2.5% have encouraged Americans to rack up an average credit card debt of close to $10,000 per household. "People are now in a revolving debt cycle that they'll never escape," says Adam Brauer, a debtor advocate and in-house counsel for Debt Settlement USA in Scottsdale, Arizona. "So the government nudged credit card companies into saying, 'This isn't working.'"

Regulators with the Office of the Comptroller of the Currency began pressuring card issuers to raise minimum monthly payments. On top of that, the newly enacted Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 now requires credit card companies to post a warning on monthly statements that notifies consumers about how long they'll be in debt if they make only minimum payments. The new law for minimum payments went into effect at the end of 2005, and several credit card companies have already doubled their minimum monthly payments from 2% to 4%.

While the new law is designed to get people out of debt faster, some people whose finances are already stretched thin find the rate hikes to be too much to bear. "If you're living paycheck to paycheck and your minimum payment goes from $200 to $275, spread over five cards, that's an extra $375 a month," says Brauer. "A lot of families can't come up with that." Faced with higher interest rates and tougher bankruptcy laws, consumers are wondering what their equity loan options are.

If you now have bad credit due to the new law, you could go through a debt-counseling program, but that will damage your credit further. If you are a homeowner, you may want to consider a debt consolidation loan through a mortgage refinance or home equity loan (second mortgage) because it will not only reduce your debt, but you also may get a 100% tax deduction on the interest you pay on your loan. With interest rates rising, it is probably best to secure mortgage refinancing with a fixed interest rate or, if the rate on your existing mortgage is low, get a second mortgage to consolidate your credit card debt. The rates will be much lower than those of your credit cards and other loans, and you'll enjoy the piece of mind of having your debts under control with a simple interest loan.