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Credit Card Companies Should Lower Interest rates by half
Here's an idea that Obama should go for. Tell credit card companies to drop their interest rates by at least half or even two thirds so that consumers can payoff their debt much sooner. This helps the credit card company and the consumer.
The company gets those bad loans paid off and the consumer can get out of debt sooner.
As far as making sure the consumer doesn't abuse, put a temporary stop on their card till they get their debt below a certain dollar amount.
The company gets those bad loans paid off and the consumer can get out of debt sooner.
As far as making sure the consumer doesn't abuse, put a temporary stop on their card till they get their debt below a certain dollar amount.
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And yet the credit card companies are sending out letters to their good customers announcing that they are raising their rates.
March 12, 2009 4:07 PM | Reply | Permalink
And let's not forget about fees!
Your post is excellent and deals with the factual reality. Please send it to Obama (via website) and let's keep talking about this!
We are giving them taxpayer money and this is a great way for all to benefit from our investment. It's a win/win.
Thanks. Rec'd.
March 12, 2009 4:18 PM | Reply | Permalink
OK with me.
March 12, 2009 4:21 PM | Reply | Permalink
Absolutely excellent idea! Stimulus, directly where it is needed, and finally a brake on usury. I mean 21% interest and even more in many cases? Bookies and loan sharks could only HOPE to get that much money outta' their marks.
Failing this, it would seem that the burst of the credit card bubble is apt to compound our present problems. Much better to look at how we're going to resolve that issue now, before that whole martket comes completely crashing down.
March 12, 2009 4:56 PM | Reply | Permalink
Coonsey - having the government dictate rates to the credit card companies is a big mistake. The credit card companies will find other ways to tighten their lending standards such as lowering borrowing limits or cancelling people's cards. People who don't carry any balance and have good credit scores will find it much harder and more expensive to get credit under your idea.
Let the credit card companies be the ones to decide if they should lower their rates. Keep the government out of it. Banks are supposed to tighten their lending standards in a recession. If someone is in trouble on their payment let the bank decide if the person's account needs to be modified.
March 12, 2009 7:08 PM | Reply | Permalink
Never though of it this way but it makes sense. This part sucks but whoever said life was suppose to be fair?
Does anyone know what an acceptable minimum balance would be?
March 12, 2009 10:38 PM | Reply | Permalink
uggggggggg (I'm better now:)...that should read, thought
March 12, 2009 10:40 PM | Reply | Permalink
An acceptable minimum balance? If people would live within their means then they wouldn't have any balance on them. You use a credit card because it's more convenient than carrying checks or cash around everywhere. But it's not meant as a backstop for that unexpected expense. Every personal finance book you ever read says that you should have an "emergency fund" set aside for unexpected expenses. An emergency fund is not a credit card. It should be cash sitting in a liquid account
March 12, 2009 11:40 PM | Reply | Permalink
I agree MCB but what happens if I suddenly find myself needing a new car. I don't and my car is paid off and running well but sht happens. My emergency money is for just that, an emergency. More so now than ever since I moved back home to take care of my mom who is not in the best of health. Now I'm not anywhere near rich so spending cash on a car (even used ) is not something I would want to spend my funds on since I have other concerns to think about.
I cut up all cc but one quite some time ago and rarely use it. When I do, never put anything on it I can't comfortably pay off in a month.
Your comment concerning people with good credit scores but without a CC balance, not being able to get credit has made me rethink my position.
March 13, 2009 1:20 AM | Reply | Permalink
You absolutely don't have to have an unpaid balance to be credit-worthy. I use my CC's instead of cash for every possible thing and pay the balance every month. I don't have a mortgage, by the standard of "having to owe" so you will be approved for credit would have me at a disadvantage.
I get offers almost every day for more credit. I recently bought a computer at BestBuy and got a two-year interest-free loan, so I am paying 80 bucks a month for a brand new MAC instead of shelling out $1500 all at once. I know that if I am one day late on any payment I will owe the entire absurd amount of interest, so I will NEVER be late.
It IS necessary to USE credit cards in order to stay credit-worthy but it is an absolute fiction that you have to keep an unpaid balance to borrow more.
Gee, I wonder who started that rumor? Could it be the credit card industry? Just a thought. In fact, people have told me I am not being fair to the industry because I am essentially getting a free loan every month. I not only get a free loan, I also get points, and every few months they send me a check for $250 just for using their card.
I don't feel bad about it, but if I were a credit card company and I made a person's minimum balance on a $5,000 debt, say $90; I would feel bad for creating a system that gets people who don't know any better, hopelessly in debt.
March 13, 2009 12:58 PM | Reply | Permalink
Thanks CVille Dem, that's the type of info I needed to know.
March 13, 2009 3:04 PM | Reply | Permalink
Just remember this: Use your credit card instead of cash. DON'T USE IT TO PAY FOR WHAT YOU CAN'T AFFORD!
If you can't afford it, don't buy it!
Use the credit card industry for the saps they try to use us for: a monthly loan with perks! Pay the balance every month, and when your points get to the dollar - for - dollar amount (for my cards it is 25,000 points, which gives me $250, cash it in! Don't go for the other stuff!)
PS: The companies that give the best point payments may often have the highest interest rates. IF YOU NEVER PAY THEM INTEREST, WHO CARES? I don't care if they charge 90% interest, because they end up paying me! I never pay one penny in interest, so I don't care!
March 13, 2009 6:57 PM | Reply | Permalink
How is this good for credit card companies exactly?
No one would lend money to credit card customers at one third or one half of current interest rates. Credit card customers aren't reliable enough risks, that's why rates are higher.
March 13, 2009 1:41 PM | Reply | Permalink
Who cares what is good for credit card companies? They have contrived with their ridiculous "minimum payments" to put people who don't have a clue into hopeless indebtedness. Screw them, like they have screwed the many un-savvy people that they have ruined financially.
March 13, 2009 7:04 PM | Reply | Permalink
I don't particularly care what is good for credit card companies, although I don't share your vitriol. I was responding to the original post which claimed a policy would be good for credit card companies.
Also, it is possible to pay more than the minimum payment. Just Sayin'.
March 13, 2009 7:16 PM | Reply | Permalink
Why it would be good for the credit card companies is that they would get paid back what they are owed! With interest rates of 20% and higher people get too far behind and declare bankruptcy. Then the card company loses their "investment." If they made the minimum payment more realistic, and had interest rates that were more reasonable, people could actually manage their debts and pay them back.
As to your comment about it being "possible" to pay more than the minimum -- of COURSE it is. The problem is that people who are financially or chronologically immature often have the idea that the minimum payment is their goal. I know, I know...how could they think this? Because it is what they are being told, and they obviously don't think for themselves. So they are not perfect.
My point is that these companies know very well that they are leading these people into impossible debt. The companies know it; the people don't. It would be great if every one was wise, but everyone isn't.
My answer? Better regulation, such as having a saner minimum payment standard, and a lower interest rate. Long term? Better for consumers, and better for the card companies, because people will always use charge cards, and fewer will declare bankruptcy.
March 14, 2009 1:10 PM | Reply | Permalink
"The problem is that people who are financially or chronologically immature often have the idea that the minimum payment is their goal."
Or perhaps...
"The problem is that people are financially or chronologically immature."
March 16, 2009 11:36 AM | Reply | Permalink
Debt consolidation can be a troubling thing. Do you know what debt consolidation is? Perhaps not, perhaps so, but it's worth mulling it over. It is at least worth looking into all of your options. One option is balance transfers, which is when you transfer the balance between credit cards. It works best if you have small balances, because otherwise you can wind up with just a huge balance gaining interest with minimum payments beyond your reach. It's definitely better resorting to payday loans now and again, than ill advised balance transfers, and it's still better to get debt consolidation.
April 22, 2009 1:49 AM | Reply | Permalink