Why Are MY Credit Card Interest Rates So High?!?
I have a Meh-Not Meh perspective on President Donald Trump.
It’s certainly not a Love-Hate perspective. I don’t waste love or loathing on politicians. They don’t warrant that level of intensity.
Politicians are what they are. Lower your expectations. You don’t expect an aberrant plow horse to win the moral Kentucky Derby.
I like more of what Trump says - less of what he does. Typical politician.
I watched live in 2015 when Trump descended the escalator to announce his candidacy. The moment in his meandering speech he swerved into curtailing illegal immigration? I said he would win the presidency.
Everyone in DC thought I was insane. Then Trump won - and everyone thought I was Nostradamus.
I wasn’t either. I just thought it was obvious. Illegal immigration was a trillion dollar bill’s worth of political capital left laying on the sidewalk for decades. Decades’ worth of DC deviants just strolled right past it. Trump picked it up.
Trump saying he would address this MASSIVE problem was, I thought, enough on its own for him to win.
Identifying issues LONG ignored by DC has been a hallmark of the Decade of Trump. I often don’t like his alleged remedies. But I REALLY like his exposing DC for the cauldron of amoral fraud it is.
And so it is with Trump swerving into the credit card interest rate problem.
I REALLY like the fact that someone is finally pointing out the huge financial and moral hazard that is the US’s usury credit card fake marketplace.
The average US credit card interest rate is 25.32%. And good news: Americans currently owe on their cards a record $1.21 trillion.
And before you blame them for partying it up? 73% of the charges are tied to essentials. They’re not buying vacations and big screen TVs. They’re paying for groceries and rent.
All that being said? I REALLY don’t like Trump’s proposed one-year 10% cap on interest. And his words now ring hollow - as his January 20th deadline for the credit card companies to act has come and is now long gone.
As with all the major structural problems plaguing the US? The nation’s credit card calamity has been decades in the making. Ask Nero - Rome wasn’t burnt in a day.
An end-point-backwards solution like a rate cap? Does nothing to address the deeply-rooted problems that got us here. Which is but one of the many reasons why end-point-backwards price controls never, ever work.
Methinks the nation’s credit card problem - is a part of the nation’s larger bank problem.
Prior decades of really bad general policy certainly contributed. But I think it is reasonable to say the final nails in the coffin were banged into place by DC’s 2010 passage of the Dodd–Frank Wall Street Reform and Consumer Protection Act.
Dodd-Frank dramatically increased regulation of the banking sector. And as is always the case? Only Big Business can afford Big Government.
Thousands of neighborhood and community banks were buried by the newly emplaced layers of Big Gov - and went out of business.
And then the “Too Big to Fail” Big Banks swooped in, bought the carcasses on the cheap - and further consolidated the marketplace.
And of course it is these Big Banks that issue the vast majority of credit cards.
You used to be able to get personalized loans from your accommodating neighborhood banks - back before they were murdered by DC.
You had a relationship with your local lender. You knew them - and they knew you. Built-in was your bank’s desire to see you and your community succeed - because they were a part of your community.
Now you get credit cards with massive interest rates from impersonal, sympathy-less, market-dominating Big Banks located nowhere near you. That can’t wait to make your first credit mistake - your last.
How do I know the Big Banks are ridiculously, rigidly inflexible and punitive? Let’s delve a bit into my credit history….
I have an 800+ credit score. With all three ratings agencies.
I have spent the last almost twenty years charging sometimes large amounts of money - spread across three different Big Bank credit cards. And paying them all off every month.
I don’t make a million dollars a year - but I certainly ain’t starving. It’s more than enough to have paid off my three credit cards every month for the last almost twenty years.
And my three Big Bank card interest rates are? 21.49%, 22.74% and 26.40%. Which are all remarkably close to the aforementioned national average of 25.32%. Which is remarkable - given my WAY above average credit ratings and record.
Oh: I now reside in Belize. My 26.40% credit card is the one that doesn’t charge me an overseas transaction fee. But its rate is absurd. And it only has a $10,000 limit - which I felt was a little low in case of dire emergencies that might arise.
I telephoned to ask for a credit increase - and a rate decrease. Which - given my ratings and record - I thought were fair requests.
The Big Bank in question didn’t even take time to pretend to consider my requests. They were both immediately denied - right there on my original phone call.
NONE of this is reflective of my credit ratings and history.
ALL of it is reflective of a hyper-consolidated market dominated by the Big Banks. Which allows them to be just this punitive with their rates and their practices.
ALL of it is reflective of a DC that saw its Dodd-Frank wreaking havoc in the banking sector as a feature - not a bug.
As did the Big Banks. Since Dodd-Frank fast-tracked their bank sector consolidation.
Yet again: I love free markets.
Unfortunately, the US no longer has any.