Credit card interest rates need a Federal mandated cap / by kevin murray

In all likelihood, usury has probably been around in one form or another, ever since mankind determined that the present value of money is not the same as the future value of that money -- and further that those that need a loan, in order to make it worthwhile for the person or entity so loaning the money, should receive something more in return for the risk and the period of time that the money is so being loaned.


In America, the banks seemingly hand out credit cards almost like candy, so that virtually every adult has received a solicitation for a credit card and subsequently has received a credit card on their person.  Unfortunately, the financial intelligence of the American consumer varies considerably, in which some of those consumers are quite cognizant and perceptive when it comes to credit cards, interest rates, penalties and so forth, and then there are those others that seemingly are clueless.


Not too surprisingly, financial institutions love those that really don't understand what they are signing up for, nor properly understand their obligations when it comes to their interest rate, penalties, due dates, and minimum payback requirements, for these consumers can be, and often are the most profitable consumers for these financial institutions to have.  Incredibly, while it might seem unfathomable, we find that in the 21st century that this modern and advanced nation, has some States of its Union, that for all intents and purposes, that do not have usury caps on the interest rate that their credit cards are issued upon.  Again, it bears repeating, that States such as South Dakota, do not limit the interest rate that credit card banking companies can charge their consumers, and that non-limitation has nothing to do with whether that person utilizing that credit card actually lives in South Dakota, but, rather the only thing that materially matters is that the banking institution must have its credit card charter operations located within that State.


In an era in which new car loans, are consummated at less than 5% for those of good credit, and mortgage rates for homes are around 4% for those of good credit, it seems to be a total outrage that some credit card companies are able to charge interest at 25% or even higher on credit card balances.  To say that this is a very easy way for financial institutions to make money would be an understatement, for as reported by, in 2016, it is estimated that credit card companies made $63.4 billion in interest income, alone.


For many traditional loans, the amount of the interest rate so charged, is based upon the "prime rate", which is typically defined as the interest rate charged to the bank's best customers, and stands currently at 5%.  The prime rate, is not fixed, and is essentially tied to the current Federal Fund Rate plus 3%; thereby signifying that the prime rate adjusts to the most current economic conditions, and because it does so adjust, allows those banking institutions to still make a reasonable profit.  In regards, to credit card issuance, this Federal government should pass a law, mandating that credit card interest rates be maxed out at the prime rate plus 8%.   This is more than fair to the banking institutions that will still be the ones that will first determine if they desire to issue a credit card in the first place, as well as being fair to the consumer, who is susceptible to paying way too much for credit so being issued, simply because no reasonable interest rate cap has been put into place.