Neither a borrower nor a lender be

Is it just me, or does the new credit card consumer protection legislation protect less responsible cardholders (those who accumulate a lot of debt or exceed spending limits) at the expense of more responsible ones who usually pay off their bills on time, and who are likely to get hit with new fees or have rewards canceled as banks try to make up for lost revenue?  Transparency is generally good, and requiring credit card companies to notify cardholders in advance of an interest rate hike seems unobjectionable — but what if the bank has to respond quickly to changing market conditions or lose money?   Is there really anyone who doesn’t know that credit card companies generally have fines for spending over the credit limit or paying by phone?  And is it really such a good idea to impose extra hurdles on young men and women between 18 and 21 — old enough to marry, vote, drive,  join the Army — before they can apply for a credit card?  (One of the options is to have a parent or guardian as a guarantor; apparently, parental control is oppressive when it comes to sex or contraception, but  not money.)  

Meanwhile, on HuffPo, Arianna rails against the evil of usury, invoking the Bible, the Koran, and St. Thomas Aquinas (inter alia).  Apparently, invoking religious texts as justification from social policy is also fine when the policy in question is a politically liberal one.  It seems that some scripturally condemned activities between consenting adults are not okay after all.

8 Comments

Filed under economy, freedom, liberalism

8 responses to “Neither a borrower nor a lender be

  1. Занятно. Подпишусь-ка я на RSS пожалуй

  2. Oh those liberals. How can you stand it? Anyway, if the credit card companies try to gouge us, we will just start using our debit card.

  3. Jeff

    Your last line = gold.

  4. Steve

    Cathy must not use credit cards that much — or maybe she is an exceptionally meticulous manager. In most credit card agreements if a payment arrives late — even 2 days late, whether it’s your fault or it was delayed in the mail — the company will assess a penalty that is usually at least $20. While it varies somewhat with the balance, a considerable penalty applies even to a balance of a dollar. So, it’s way beyond traditional notions of usury — it often corresponds to an annual percentage rate (APR) of well over 100%.

    Even for people who normally pay off their balances every month, in addition to the late payment penalty, on the month following such a minor infraction the companies will bill you for interest on the balance….not just the one you were late paying off but the sum of that and bills you accumulated in the following month. APR’s for this range from about 10% to 22%. Therefore, you get to pay twice for even minor carelessness, while the company gets to keep the difference between the APR it pays you, and the APR it pays the Federal Reserve or other banks for the use of the funds you were using (called the prime rate, this is under 4% now.) This is on top of a fee the card issuers charge the merchant you use the credit cards to buy things from.

    I think the banks are making plenty of money on credit cards without being allowed to continue the practices the new law makes illegal. I think the new law does not go far enough curbing credit card scams, including over-limit and late payment fees.

    In view of how important credit cards are in the US economy there is a clear public interest in making their billing more transparent and equitable.

    While I would say my “fiscal conservative” credentials are as good as Cathy’s, in this case I’m OK with more regulation.

    By the way, I have developed a simple “Financial Literacy Test”.
    If you can define the terms “debenture” and “derivative” (recognizing that the latter is not the calculus term of the same name), you’re financially literate.

    I can no longer pass this test myself since I forgot what a debenture was around 1990. I wonder how many of Cathy’s readers can pass?

  5. Steve

    oops….hit “submit” too soon. “The APR it pays you” in paragraph 2 should have been “the APR you pay it”!

  6. Oh, I definitely use credit cards. :) And I’ve paid my share of late fees, but in my experience credit card companies are (1) pretty upfront about those, and (2) willing to waive the fee if the payment arrived late due to a post-office delay. (Of course, these days people increasingly pay online.) On one occasion I was even able to get them to waive a late fee when my payment was late due to travel.

    Maybe other credit card companies are less transparent or accommodating than mine. I’m also well aware that you’re assessed a finance charge if you’re late. But don’t most credit card bills come with an explicit recommendation to mail the payment at least 7 days in advance (if you’re using snail mail) to make sure it doesn’t arrive late?

  7. Revenant

    I pay my credit cards through direct withdrawl from my checking account. No possibility of late fees, and no chance of the check getting lost in the mail.

  8. Al in SoCal

    Loan sharking is illegal, but if you call yourself a bank then it suddenly becomes legal. Sending a letter is not so tough – especially when it means the receiver of that letter could have their rate doubled or tripled depending. I don’t think the credit card companies need you to support them, they have lots and lots of lobbyists. Who lobbies for the 20-somethings, and those mess up and are late one-time get slapped with a $40 fee and 30% rate.

    I guess when scripture is used to stop to deny others rights and further the hate-based mobs that use it for that specific purpose then it’s not ok, but when it helps people get out of debt then it is ok. I think that is the whole meaning of the book – right?

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