Sanders, Ocasio-Cortez propose limit on credit card interest rates

Apr 2013
38,361
26,339
La La Land North
#11
This is all very interesting. However, how do you make the calculation that lower rates will necessarily mean fewer credit card users?
I understand the market forces idea and that some level of interest rate justifies the greater risk, but translating that into real numbers is difficult.

It also does not factor in the damage caused by high interest rates (vicious cycle of poverty etc.).
This all smells like a libertarian fantasy complaint. Interest rates are like rules of the road such as speed limits that establish a certain boundaries to the process.

I am not enamored by the idea that the marketplace will necessarily choose the "best" interest rate. What if credit card companies have a "gentleman's agreement" to set the rates higher than the truly free market would tend to produce?
That's why I want to see the data.

Canada has regulations about what percentage of a person's income after other expenses can be applied to a mortgage in order to get government backing that guarantees the mortgage. Trying to get a mortgage without this guarantee leads to very high mortgage rates which means reputable institutions won't give you those mortgages without a huge down payment. If you qualify for the government guarantee, 5% is all the down payment you need.

History has proven that defaults under these circumstances are minimized.

The risk needs to be known. Just like life insurance premiums vary depending on lifestyle, so do lending rates. The difference with credit cards and payday loans is that each individual is not evaluated so the risk cost is spread equally among everyone.

Whether currently that risk cost is too high is another matter.
 
Dec 2018
1,782
1,050
Unionville Indiana
#12
I'm a "deadbeat" because I pay my credit card off in full every month. They hate me!

Credit card companies call cardholders who carry a balance every month “revolvers,” and these customers are a major source of profit because they are constantly paying interest. “Transactors,” on the other hand, are customers who pay their credit card bills in full every month, avoiding interest charges. These customers have also been called “deadbeats,” since they offer little benefit to the credit card company. In many cases, it’s the revolvers or subprime customers that banks will target because they generate significant returns.

10 Things Credit Card Companies Don’t Want You to Know
 
Apr 2015
1,949
2,201
Spain
#13
I don't have a credit card, I hate the idea behind them.
I have a debit card from the bank and if I want to raise extra money I'll take out a bank loan.
 
Dec 2018
1,782
1,050
Unionville Indiana
#15
For the poor suckers who think they're getting an even break from their credit card company:

In the past, a 5% minimum monthly payment for a credit card was typical, according to U.S. News and World Report, but today’s minimum payments are usually 2%. This might seem attractive to customers, but for revolvers, who account for more than 40% of American cardholders, it means it will take much longer to get out of debt if only paying the minimum each month.

10 Things Credit Card Companies Don’t Want You to Know
 
Apr 2013
38,361
26,339
La La Land North
#16
I'm a "deadbeat" because I pay my credit card off in full every month. They hate me!

Credit card companies call cardholders who carry a balance every month “revolvers,” and these customers are a major source of profit because they are constantly paying interest. “Transactors,” on the other hand, are customers who pay their credit card bills in full every month, avoiding interest charges. These customers have also been called “deadbeats,” since they offer little benefit to the credit card company. In many cases, it’s the revolvers or subprime customers that banks will target because they generate significant returns.

10 Things Credit Card Companies Don’t Want You to Know
And I'm one step worse. I found a credit card that gives me 1% on my purchases and doesn't have an annual fee.. And in 41 years of carrying credit cards, and using them frequently, I have only paid interest twice. Both times when I took extended vacations and in the excitement of it all just plain forgot about the bill and the due date being when I was away.

The last one I had of that type gave up and cancelled that card so that they could institute an annual fee and only give rebates on very limited types of transactions. I dropped them like ...
 
Dec 2018
1,782
1,050
Unionville Indiana
#17
And I'm one step worse. I found a credit card that gives me 1% on my purchases and doesn't have an annual fee.. And in 41 years of carrying credit cards, and using them frequently, I have only paid interest twice. Both times when I took extended vacations and in the excitement of it all just plain forgot about the bill and the due date being when I was away.

The last one I had of that type gave up and cancelled that card so that they could institute an annual fee and only give rebates on very limited types of transactions. I dropped them like ...
Fortunately, I belong to a credit union that issues credit cards with no annual fee and no interest ever if monthly payments are made on time. I've lucked out and never missed a monthly payment, but it may be in your interest (no pun intended) and mine to follow MichaelT's advice and go with a debit card instead.
 
Dec 2016
5,575
2,830
Canada
#18
IMO another example of the road to hell is paved with good intentions.

I predict that this, if passed will make it much more difficult to qualify for a credit card and thus many people in the lower economic strata will be left without that service.

And payday loan companies, if they have any legitimate reason to exist at all would be even more selective.

We'd be back to the old joke, they only lend money to people who don't need it.

Sanders, Ocasio-Cortez propose limit on credit card interest rates - Reuters and many more.
Not hard to figure out which business you work in! Why shouldn't it be hard to get a damn credit card? My kids were getting unsolicited credit card offers in the mail before they graduate high school. When I was young, you had to apply and qualify to get one. And most people, aside from businessmen didn't bother with them 40 years ago. Nowadays, everyone's in debt! There are even retirees still paying off student loan debts for christs sakes.

People who pay their loans are getting cheated by legalized loansharking, and it's about time Sanders and AOC took action....since there's almost nobody else in Congress who will do it. I know one guy who won't be happy about this...and his first name is Joe. Job #2 should be: go after the payday lenders...which are owned by major banking institutions these days and keep poor people permanently in a debt trap!
 
Dec 2016
5,575
2,830
Canada
#19
This is all very interesting. However, how do you make the calculation that lower rates will necessarily mean fewer credit card users?
Could one of you liberal to far right capitalists explain to me why the most powerful banks get QE money for free while average people have to pay high interest rates?
 
Dec 2016
5,575
2,830
Canada
#20
And I'm one step worse. I found a credit card that gives me 1% on my purchases and doesn't have an annual fee.. And in 41 years of carrying credit cards, and using them frequently, I have only paid interest twice. Both times when I took extended vacations and in the excitement of it all just plain forgot about the bill and the due date being when I was away.

The last one I had of that type gave up and cancelled that card so that they could institute an annual fee and only give rebates on very limited types of transactions. I dropped them like ...
And how do you connect all this with being against a proposed law capping credit card interest rates?
 

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