I thought Credit cards were not a neccessity...

[armor99]

Obama to meet with credit card execs, make his case - Yahoo! Finance=

This sort of thing really makes my blood boil.... So now the govt is going to step in and tell a private business what they are allowed to charge for their services?

Last time I checked, no one has forced anyone to get a credit card, and if you do have a credit card and pay it off in full every month, then the interest rates become irrelavent anyway. Why does the govt get to tell any business what they get to charge for their products or services?

This is yet another example of how the so called "Nanny state" gets created. It takes the premise that left to their own thoughts, most people will screw up their lives. And you know what... even if that is true... is this the way to make it any better? Rather than mandate limits on the fees a credit card company can charge, would it not be a better use of tax payer money to create school education programs on the subject? Why not educate our children about the problems of credit card debt etc? Would this not be a better way to stop the problem at it's source?

Just my thoughts... some may agree... others... not so much...

 

[FinanceDude]

I agree, almost. The infamous "universal default rates", where CC companies had the right to jack up folks who PAY ON TIME up to 29% are BS. It's the CC companies way of hedging against the folks who have bad credit. If someone carries a high balance but pays on time, they should not be discriminated against........

 

[waltwill8]

A little history

Back when, credit cards with balances were rare - there was not much profit in it. State usury laws limited the amount of interest that could be charged, and most states had fairly low percentage maximums.

I had an American Express Card for the convenience. You paid them, I think, $50/year to use the card and had to pay off the balance monthly.

In 1978, the Supreme court (Marquette vs. First Omaha Service Corp ) ruled that a national bank could charge the highest rate allowed in its home state to customers in other states.

Hmm. South Dakota was first out of the gate, and changed their usury laws to allow very high rates or eliminated them altogether. I don't remember which.

Whoosh --- Banks started to move to South Dakota. Other states started to change their laws to keep their banks at home, or attract new ones.
Rates are now allowed up to, I think, 24%, with all kinds of extra fees for this and that. I think Arkansas is still down below 10%, but I haven't been following this for years.

The politicians say this is good - allows more choices (and more contributions from the banks). The banks like it too, for obvious reasons.

Now the Gov't is charging in to help. Yah, right.

Bottom line - don't play the game. Pay it off!

Credit cards can be a good source of perks for those of us who keep this in mind.

 

[Texas Proud]

I was thinking the same... but then I remembered that almost all cards are issued by a very few companies... so we really do not have a lot of choice.. also, if one does something that makes money, the others follow...

My problem is some of the rules... like they can change the interest rate on just YOUR card because... well, who knows.. they just can...

And then they will charge interest back to the day you bought something instead of the 'due date' of the card... so if you only make a full payment every other month.. you actually pay interest on everything...

Also the fees they charge (and change all the time) are way out of whack.. and you don't know about it until it is to late. As an example, I was charged almost $7 per minute on long distance from AT&T... this is not listed anywhere and only shows up after the call has been made.. and we can make calls for 2 CENTS a minute if we use a card...

So, I am on both sides of the fence on this one...

 

[haha]

Last time I checked, no one has forced anyone to get a credit card...

While this may be literally true, dont try to fly, or rent a hotel room, or do a host of other things without having one.

Ha

 

[FinanceDude]

While this may be literally true, dont try to fly, or rent a hotel room, or do a host of other things without having one.

Ha

Actually, you can use a debit card for that, although some are uncomfortable doing so. As long as your debit card has a VISA or Mastercard logo, they take it like a credit card........

 

[Texas Proud]

Actually, you can use a debit card for that, although some are uncomfortable doing so. As long as your debit card has a VISA or Mastercard logo, they take it like a credit card........

The horror stories from debit cards are worse than credit cards IMO...

I don't have one... (well, I lie now.. just opened up a new checking account and they sent me one... they want to charge me $8 to just have an ATM card ) I use an ATM card to get cash and credit cards to purchase stuff... I kind of like my 'rights' I have with the CC..

 

[donheff]

So I run up several thousand dollars in debt on a credit card from the Bank of Evil Practices which advertises a low interest rate. I always pay at least the amount due and a little more as I make a good faith effort to pay my debt. The mailman drops off a bill from a different card at the wrong house and I am late on a payment for that other card. Suddenly, Bank of Evil Practices raises the rate on my entire debt (not just new charges) to 29%. That's legal so they can go ahead and do it to me. Fat cats get rich that way. Good for them - its the American way.

In the meantime, I get pissed off as do 200 million others like me. Our elected representatives respond by regulating the credit card business to make things a bit more sensible. That is legal too. Good for us - its the American way.

 

[FUEGO]

In the meantime, I get pissed off as do 200 million others like me. Our elected representatives respond by regulating the credit card business to make things a bit more sensible. That is legal too. Good for us - its the American way.

150 million of those pissed off people continue to have access to credit cards at slightly better, more "fair" terms. 50 million of those pissed off people have their credit cards revoked by the card issuers because the card issuers refuse to take on uncompensated risk (we are in a new era of governmentally mandated corporate fiscal responsibility after all).

They whine and complain to their elected representatives about lack of access to credit to feed their families, run their businesses, blah blah blah boo hoo wah wah etc ad nauseum. The elected representatives (the fat cats that THEY are) feel really really bad and hold congressional hearings to chastise the indigent banks for having the audacity to deny credit to these hard working, honest, salt of the earth people (who just happen to have a risky credit profile). After all, congress gave these broke banks a bunch of money. The least they could do is give some back to those in need, right. It's the American way, right?

In the meantime, the 50 million who had their "good" credit cards revoked have now moved on and paid a $100 application fee to obtain a $500 credit limit credit card ($300 of which is securitized by a cash deposit) with an annual fee of $59. They need credit after all.

All the while the poor unbanked homeless people (er, ah, "domicile challenged") are laughing at the irony of the law of unintended consequences.

 

[donheff]

150 million of those pissed off people continue to have access to credit cards at slightly better, more "fair" terms. 50 million of those pissed off people have their credit cards revoked by the card issuers because the card issuers refuse to take on uncompensated risk (we are in a new era of governmentally mandated corporate fiscal responsibility after all).

They whine and complain to their elected representatives about lack of access to credit to feed their families, run their businesses, blah blah blah boo hoo wah wah etc ad nauseum. The elected representatives (the fat cats that THEY are) feel really really bad and hold congressional hearings to chastise the indigent banks for having the audacity to deny credit to these hard working, honest, salt of the earth people (who just happen to have a risky credit profile). After all, congress gave these broke banks a bunch of money. The least they could do is give some back to those in need, right. It's the American way, right?

In the meantime, the 50 million who had their "good" credit cards revoked have now moved on and paid a $100 application fee to obtain a $500 credit limit credit card ($300 of which is securitized by a cash deposit) with an annual fee of $59. They need credit after all.

All the while the poor unbanked homeless people (er, ah, "domicile challenged") are laughing at the irony of the law of unintended consequences.

Sure, I have heard it on Fox news from the bank apologists. Two things:
1) It won't happen that way. The card companies will continue to issue cards to the vast majority of people who want them;
2) The few people who won't get cards shouldn't have gotten them in the first place. Just as they shouldn't have gotten the NINJA loans the banks issued.

Even if the card companies folded their tents, all of us self righteous folks have been saying everyone should pay off their bills in full every month anyway. That would simply be the market enforcing our frugality

 

[FUEGO]

Sure, I have heard it on Fox news from the bank apologists. Two things:
1) It won't happen that way. The card companies will continue to issue cards to the vast majority of people who want them;
2) The few people who won't get cards shouldn't have gotten them in the first place. Just as they shouldn't have gotten the NINJA loans the banks issued.

Even if the card companies folded their tents, all of us self righteous folks have been saying everyone should pay off their bills in full every month anyway. That would simply be the market enforcing our frugality

That's the problem - you've been watching way too much Fox News and you got the brain rot!

I think the truth lies somewhere between what you describe and what I describe. There will be some people on the margins that want access to credit, and may have high incomes to pay back their cards, but are unable to get a card because they are too risky. And the CC companies won't be able to make a profit off those risky cardholders so they will excise that segment. These risky borrowers will undoubtedly find credit somewhere, and the company issuing that credit will figure out a good way to screw the borrowers within the new kinder gentler regulatory framework.

I'm surprised most folks here aren't in favor of exorbitant CC interest rates and fees! We all pay off the balance in full and we all own bank stocks through our mutual funds. So we get cheap/free credit, rewards miles/points, and (eventually) profits from banks' CC issuance and lending.

 

[freebird5825]

From the article...
"This bill cracks down on some of the most outrageous abuses," Maloney said Wednesday. "My bill levels the playing field so consumers have more control over their credit."

Hmmmm...control over their credit. Last time I checked the best way for consumers to have control over their credit is to
a) not use it, b) use it and pay it off in full, or c) use it, pay it off partially, and pay interest until paid in full.
Such a dinosaur.
I (we) have no firsthand feel for what is going on with frivolous consumerism and bloated credit card interest payments or default, because I (we) don't particpate in that nonsense.

 

[Notmuchlonger]

My credit card is a discount for anything. If they take away from charging the outrageous rates for the people who don't pay. Ill get cheated out of my discounts. You always need losers in a capitalist society.

 

[armor99]

From the article...
"This bill cracks down on some of the most outrageous abuses," Maloney said Wednesday. "My bill levels the playing field so consumers have more control over their credit."

Hmmmm...control over their credit. Last time I checked the best way for consumers to have control over their credit is to
a) not use it, b) use it and pay it off in full, or c) use it, pay it off partially, and pay interest until paid in full.
Such a dinosaur.
I (we) have no firsthand feel for what is going on with frivolous consumerism and bloated credit card interest payments or default, because I (we) don't particpate in that nonsense.

(sarcasm filter on) Don't be silly Freebird... those are just poor people that got in over their heads.. They really did not understand how to properly manange their credit. I mean after all just because they messed up their credit in the past, you do not KNOW for certain, they will mess it up again in the future. It takes a village to pay off a credit card debt right? (ok... filter off)...

Look.... pay off your bills every month and there are no problems. Play the game of credit "hot potato" and eventually you will probably get burned. I think credit card companies can charge whatever they want. If you agree to their terms... great... go for it. If not... then look for others. There is nothing fair or unfair about it.

If there is something for the govt to regulate here, if anything, is to make sure all of the terms and conditions are clearly posted. The govt might make up some legislation standardizing a clear easy to read chart about your rates, late fees, etc. Much like they did with nutritional postings on food items. That is something that I could get behind. I view a company that tries to hide their terms as somewhat dishonest, and would be ok with a bit of legislation to fix that.

For me it is pretty simple, if the govt needs to get involved in business transactions at all, then let it be only to allow both sides to see as clearly as possible what they are getting into. Rather than the opposite approach, which is for the govt to start controlling those transactions and becomming the "fair" police. Let ME decide what is fair and what is not please!

 

[freebird5825]

(sarcasm filter on) Don't be silly Freebird... those are just poor people that got in over their heads.. They really did not understand how to properly manange their credit. I mean after all just because they messed up their credit in the past, you do not KNOW for certain, they will mess it up again in the future. It takes a village to pay off a credit card debt right? (ok... filter off)...

Look.... pay off your bills every month and there are no problems. Play the game of credit "hot potato" and eventually you will probably get burned. I think credit card companies can charge whatever they want. If you agree to their terms... great... go for it. If not... then look for others. There is nothing fair or unfair about it.

If there is something for the govt to regulate here, if anything, is to make sure all of the terms and conditions are clearly posted. The govt might make up some legislation standardizing a clear easy to read chart about your rates, late fees, etc. Much like they did with nutritional postings on food items. That is something that I could get behind. I view a company that tries to hide their terms as somewhat dishonest, and would be ok with a bit of legislation to fix that.

For me it is pretty simple, if the govt needs to get involved in business transactions at all, then let it be only to allow both sides to see as clearly as possible what they are getting into. Rather than the opposite approach, which is for the govt to start controlling those transactions and becomming the "fair" police. Let ME decide what is fair and what is not please!

Bravo Bravo! We are definitely on the same page.

What a lot of folks don't realize is they can get much better terms for very short term credit needs with a credit union or bank line of credit.
I never used one myself, but dh2b had to do that twice to cover his half of our household costs while he was being skewered with divorce related legal costs. He paid it all off once he got his monthly retirement check. Never used it again.

 

[FinanceDude]

I'm surprised most folks here aren't in favor of exorbitant CC interest rates and fees! We all pay off the balance in full and we all own bank stocks through our mutual funds. So we get cheap/free credit, rewards miles/points, and (eventually) profits from banks' CC issuance and lending.

I think most are. However, the folks on this board represent what, maybe 2-3% of the US citizenry? I say crush those that misuse the system, but raising rates from 9% to 29% on folks who pay regularly like clockwork just because a company feels like it is taking it a bit far..........

 

[FUEGO]

I think most are. However, the folks on this board represent what, maybe 2-3% of the US citizenry? I say crush those that misuse the system, but raising rates from 9% to 29% on folks who pay regularly like clockwork just because a company feels like it is taking it a bit far..........

Well, if one has limited liquidity (as in, they are broke), one should seek fixed terms on credit facilities. Carrying debt on a CC at a variable rate that can be changed at any time isn't a good idea if it is long term (as in more than a month). The problem, obviously, is that people can't qualify for good financing most times, and that is why they are stuck going to the lender of last resort (except for cousin Vito the kneebreaker), the CC companies.

It is really a similar issue to ARMs on houses. If you have enough liquidity to pay off the mortgage immediately or quickly, you may not care how much your mortgage changes month to month or year to year. I acknowledge that ARMs typically vary based on some published index rate plus a certain margin, unlike credit cards whose terms can be changed mid game. But the point remains - if you absolutely need a certain rate of interest on a loan to survive, then obtain a fixed rate of interest at the lowest possible cost.

 

[FUEGO]

Bravo Bravo! We are definitely on the same page.

What a lot of folks don't realize is they can get much better terms for very short term credit needs with a credit union or bank line of credit.
I never used one myself, but dh2b had to do that twice to cover his half of our household costs while he was being skewered with divorce related legal costs. He paid it all off once he got his monthly retirement check. Never used it again.

Sometimes. But frequently CC's can be much cheaper than bank loans. For example, Penfed has a deal right now on their CC that is 2.99% balance transfer for the life of the balance plus a one time fee up front up to $100. This is something that can be repaid over many years (or immediately with no prepayment penalty). Of course you have to do business with an evil credit card company... And if you miss a payment, your rate will probably go up. Most unsecured lines from banks are at least a few percent higher interest rate than this. Now if "really short term" truly means less than a month or two, then a no fee bank loan may be cheaper. Problem is that sometimes those loans get stretched out longer and they end up costing more after a couple months.

 

[Bestwifeever]

Wasn't that long ago in the history of the US that people had a mortgage and a car payment. All else was cash. No money, no purchase. Plan ahead or do without.

Maybe we need a movement to skip the whole "pay your credit card bill on time" step and just pay cash in the first place.

 

[FUEGO]

Maybe we need a movement to skip the whole "pay your credit card bill on time" step and just pay cash in the first place.

I think that movement has been going strong for a while. Some adhere strongly and are better off for it. The responsibility of a credit card is too great for some.

Definitely good advice - if you don't have the money for something, don't buy it. I just happen to like getting a month or two loan from the credit card companies plus many hundreds per year in cash back just for making purchases I would have made anyway. And if I ever get robbed, pickpocketed, or lose my wallet, I lose my $0 liability credit card instead of fistfuls of cash that I would have to carry to pay for everything that I may need to buy periodically.

 

[Abreutime]

So I run up several thousand dollars in debt on a credit card from the Bank of Evil Practices which advertises a low interest rate. I always pay at least the amount due and a little more as I make a good faith effort to pay my debt. The mailman drops off a bill from a different card at the wrong house and I am late on a payment for that other card. Suddenly, Bank of Evil Practices raises the rate on my entire debt (not just new charges) to 29%. That's legal so they can go ahead and do it to me. Fat cats get rich that way. Good for them - its the American way.

1) You wouldn't get the low initial interest rate if credit card companies couldn't raise rates later on.
2) If someone stops paying credit card x, the risk to credit card y goes up. It's a reality. And as long as it's legal to do so, CC companies will price that risk accordingly.
3) You're still responsible for bills, rain or shine, mailman error or not.
4) You may think that the credit industry should be run more like a charity, but it's a business. Your "good faith" efforts don't offer extra protections from the contractual obligations. You don't get extra consideration for trying hard, and when you earned your money, it probably had nothing to do with "good faith effort" and everything to do with output.

 

[clifp]

I think most are. However, the folks on this board represent what, maybe 2-3% of the US citizenry? I say crush those that misuse the system, but raising rates from 9% to 29% on folks who pay regularly like clockwork just because a company feels like it is taking it a bit far..........

As I person who's dividend income has been crushed because the bank stocks he owns are losing money because of deadbeat borrowers, I say raise those fees, jack up those interest rates, there is still blood in a few turnips, squeeze harder.

Wearing my, US Taxpayer and major creditor of many banks, hat, I have similar feelings. I do want to get paid back the money we have loaned the banks and banks do need to be profitable for the economy to recover and our collective debt to be reduced.

Wearing my compassionate conservative hat (a pity Bush 43 trashed the brand), I think the government has a legitimate role in acting as referee between consumers and banks, so I really hope that Congress stands up to the bank lobbyist and passes a good bill.

When the Supreme Court, ruled that banks/credit card companies could
set up shop in whatever state prostituted themselves the worst. It did several things, it enriched South Dakota, made a mockery of the 10th amendment, and destroyed the centuries (dating back to English laws) long tradition of allowing local communities to set usury laws.

The balance of power shifted even further in favor of banks. Credit card have gone out of the way to make there product impossible to understand. When I was playing the balance transfer game a few years ago, I actually sat down and would spend an hour reading the credit card agreements. IIRC, the size of these agreement has increased 500% in the last decade or so. I think it is virtually impossible for the average (and I consider myself well above average in financial sophistication) to comprehend these agreements. What is even worse is they are constantly updating these, and of course they never highlight what was changed between the agreement 6 months ago. I had to pay several hundred dollars in interest, because, despite what the credit card company rep said, my balance transfer had to be paid back in July, not June like both of us thought.

The News Hour had a good discussion last night about the issue. I agree with commentaries that it is important to distinguish from banks tightening credit requirement, which I think is important for them to do, and there desire to squeeze even more bucks out their most profitable and most desperate customers by jacking up interest rates and fees.

 

[clifp]

Obama to meet with credit card execs, make his case - Yahoo! Finance=

This sort of thing really makes my blood boil.... So now the govt is going to step in and tell a private business what they are allowed to charge for their services?

Last time I checked, no one has forced anyone to get a credit card, and if you do have a credit card and pay it off in full every month, then the interest rates become irrelavent anyway. Why does the govt get to tell any business what they get to charge for their products or services?

This is yet another example of how the so called "Nanny state" gets created. It takes the premise that left to their own thoughts, most people will screw up their lives. And you know what... even if that is true... is this the way to make it any better? Rather than mandate limits on the fees a credit card company can charge, would it not be a better use of tax payer money to create school education programs on the subject? Why not educate our children about the problems of credit card debt etc? Would this not be a better way to stop the problem at it's source?

Just my thoughts... some may agree... others... not so much...

I think 90% of Americans understand at basic level that running a large credit card balance is a bad idea. The credit card companies spent billions of dollars, and employed the best marketing minds in developing advertising campaigns to convince the consumer that; "our card is different it is ok to run a balance on out card because we have really low (even 0%) interest.
As I mentioned in my previous post, there is simply no amount of education we could provide to counter act the deceptive advertising the CC companies use.

Armor I urge you to read your credit card agreements (you save them for future reference right?) and then develop a lesson plan for a high school kid about understanding credit cards. Good luck

I think conservatives (and I generally consider myself one) put too much faith in a Laissez fair system.

There is good piece in the WSJ by two prominent economist Robert Shiller and an admittedly liberal Nobel Laureate economist George Akerlof, on the need for the government to play a role as referee in a free market economy.

 

[alvarezg]

I see credit cards as another consumer product, maybe not an absolute necessity, but still righly subject to consumer protection. Just like a can of beans, nobody forces it on you, but you expect the government you pay for to regulate the product so it's not toxic.

 

[HFWR]

I see credit cards as another consumer product, maybe not an absolute necessity, but still righly subject to consumer protection. Just like a can of beans, nobody forces it on you, but you expect the government you pay for to regulate the product so it's not toxic.

We should add beans to the "cap-and-trade" list, to help offset the greenhouse gas emissions.