WhiteSites Blog
WhiteSites Blog
Trump wants a 10% cap on credit card rates for 1 year. Banks say such a move would tank the economy, with 80% of consumers no longer qualifying for credit. Banks are assuming that these consumers would simply stop spending if they could no longer use credit cards. This is greatly exagerated.
Most of the people I know don't use credit cards because they don't have money. They use them because they of the points. If a business does not charge me extra to use a credit card, I use it. My credit card them rewards me with points ( cash back ) which range from 1% - 5% depending on the type of purchase, and what other games I am playing with the bank. I then pay off the card each month in full, and pay no interest. Now credit card company's do not make a lot of money off me, other than the swipe fees they get to charge the business. But many consumers maintain a balance on their cards, and only make the minimum payment. These consumers are the ones the banks make the most money off of, but they are also the ones that most often default on their credit cards, causing the banks to eat it.
Yes a 10% cap on credit card rates means consumers with anything but excellent credit scores would not be allowed to have a credit card. The rich and fiscally responsible would continue to use credit cards, while the rest of the population would use their debit cards, or even cash.
My thinking is that this would actually be a good thing for the economy. People would no longer be able to purchase things with money they don't have. If a person's credit history is so bad that banks have to charge them 35% interest, maybe they shouldn't be allowed to have a credit card.
In the end when people can't simply buy instant gradification, they will be more motivated to work. Once they have money in the bank, they might think differently about that purchase.
Personally I am all for the 10% cap. Even if it means they eliminate the points programs it will be worth it for the country.