Matt Yglesias

11 Responses to “Defense of Credit Card Interest Rates Doesn’t Hold Water”

1. fostert Says:
   May 23rd, 2009 at 3:23 pm

   We all have or line about when loans becomes loan sharking. I’ll draw it at 15%. Some others might say 20% or 10%, but what the credit card companies do is way beyond that. We’ve busted mafias before, and we can do it again. We need some real thugs that can talk like Lyndon Johnson and get hard on their ass. And given that we’re the ones propping these companies up, we should have some say. I want to see Barney Frank with a huge Russian thug in the offices of these companies and really lay down the line. Let Barney talk, and if that doesn’t work, let the Russian thug throw the CEO out the window. If that doesn’t make a statement, nothing will. But I’ll bet that the credit card companies listen after that. I don’t advocate murder, but in this case, I’ll make an exception. And for the record, I have no credit except for my mortgage. This isn’t an issue that touches me because I don’t want those fucks involved with me. You want me to have credit with you? Well, you’ll die of acute terminal lead poisoning before that happens. And you’ll be infected at supersonic velocity. And I’m already curious as to the blood spatter from my gun, so my finger is quite itchy on the trigger. Unless you’re willing to give me a fixed 5% rate.

2. Dugrik Says:
   May 23rd, 2009 at 3:45 pm

   No one has to pay a dime of interest if they pay off their balance monthly. Learn to live within your means, people.

3. fostert Says:
   May 23rd, 2009 at 3:46 pm

   Now I’ll be accused of over the top rhetoric with that statement, but let’s get real, these people are behaving like mafia loan sharks. There is simply no reason to think that they might be reasonable people and no reason to think that they would respond to anything but a gun to their head. But what if we actually did it? What if everyone got a new credit card, ran up $10K on it, and then just refused to pay? If we all do it, then there’s no stigma for anyone because we all did it. But it would crash the whole system. But hey, that’s the system of the credit card companies, not our system. Obviously, it’s economic suicide for all of us. But do the credit card companies want to go down with us? It might work.

4. fostert Says:
   May 23rd, 2009 at 4:01 pm

   “Learn to live within your means, people.”

   And I’m sure you have no mortgage right? You bought your house with cash? If not, then you can’t talk. I have no credit card debt, but I do still have a mortgage. Funny how I couldn’t come up with what a house costs. Debt is debt, and I had none until I bought my house. And I got screwed because I had no previous debt. Perfect credit rating, but no debt. And let’s face it, nobody wants to loan money to someone who’s solvent. You’d always prefer someone who’s up to their ears in debt. And I wish I were being sarcastic here, but I’m not. The people that loan money really do want people who can’t pay it back. When I bough my house, I had liquid assets that could have bought the whole house with cash. Because of that, they gave me a higher interest rate. I was a lower credit risk after all, so I could pay a higher rate. But given that every loan company works from the same formula, I had no options on loans. Everyone though I was too solvent to buy a house. I should have just cashed in and then taken a loan off the house. That would look less solvent, so I should get a better rate. But this is just stupid. How does having less money help you? Why should it? It makes no sense, but that’s what the loan companies like.

5. mim Says:
   May 23rd, 2009 at 4:57 pm

   Delaware and South Dakota grabbed the credit-card business when they repealed their usury laws.

   Finally, a Federal usury law. It’s about time. It may not be enough, but it’s a start.

6. MattF Says:
   May 23rd, 2009 at 4:58 pm

   I guess that the linked analysis means that there’s really no free market in credit card interest rates. Part of the problem is that card users can’t just drop expensive cards and get cheaper ones– there’s a cost to the borrower in switching cards. I’d guess also that the card issuers have to factor in the cost of getting a stream of new customers (including new borrowers) to make up for the cost of old customers switching and going BK. It wouldn’t surprise me if the issuers just write off anyone who misses a payment… that would explain the big jump in rates.

7. Rob Knapp Says:
   May 23rd, 2009 at 5:34 pm

   Maybe the market is really in negotiated rates with a given card. One person’s story (mine): I was so incensed by one provider’s notice that our rate would go up to the high 20%’s that I called to say we were dropping the card. “Well,” the guy said, “in that case, how about 22%?” Unfortunately for him/them, I wasn’t interested in a deal, I was objecting to a practice of gouging, so his offer just made me more incensed (”You mean only the assertive get favorable treatment, and everyone else gets gouged? Forget it!”). We dropped the card. But maybe there is a thin market there.

8. Scott P. Says:
   May 23rd, 2009 at 6:32 pm

   After everything is taken into account, a rigorous, highly tested credit recommendation pops out of their risk management engine.

   So that’s what they’re calling their ass nowadays.

9. Benny Lava Says:
   May 23rd, 2009 at 9:59 pm

   Restricting rates isn’t good because rates are really not an absolute. 18% interest rates weren’t very high at all in the early 80s. So to put a cap on a percent isn’t wise. Instead, putting a cap on points over par might be.

10. Max424 Says:
    May 24th, 2009 at 1:08 am

    If the country had a National mega-bank -call it the United States Savings and Loan- it could issue credit cards to the American people and charge say, 5% interest.

    Obviously, the USS&L would make a shitload of money. By doing so, the US government, awash in cash, would not have to exorbitantly tax its citizens to point of death and beyond.

    The private credit card companies could continue to do what they do best, compete ruthlessly in the open market. As we know, such competition ensures the consumer -the average American citizen- always makes out like a bandit.

    Either way, the American consumer would have a choice. He might choose to make out like a bandit in the private sector and/or choose to accept a government credit card.

    Occasionally, some patriots might even purposely choose to be late on payments of their government card, just so they could pay the interest penalty and give the good old government of the US of A some extra funding.

11. Aatos Says:
    May 24th, 2009 at 4:41 am

    I use my credit card as much as possible to collect the cash rebates. So if they want to threaten to take my rebate away, screw them. They can just go ahead and give up their little 2% interchange royalty every time I shop. Paypal, online bill pay, automatic deduction and debit cards are still free. Without the rebate, I have no other use for that card.