Debt Stupid

This post actually started as a comment at Credit Card Lowdown’s recent post on How Credit Card Rate Jacks Actually Work.

I understand that not all of the banks offering credit cards are evil. But the majority are. They are worst than thieves.

I carry two credit cards with insane interest rates and all because of the universal default clause. Which I am sure happened because I was late with (out of negligence more than not having the ability to pay) a utility bill here and there, but not because I was not able to pay or have ever been late with my credit card bills.

I think this practice is criminal and congress should get off their butts and take care of this problem once and for all.

And no, I don’t buy the argument that forcing companies to stop predatory practices will force them to stop lending to low income or minorities. That’s not the way the real world works. And raising someone’s interest rate to 28% because of a universal default clause has nothing to do with your ability to pay down your loan. If that was the case, why did they lend you the money or cleared you to borrow X amount of money in the first place at a lower rate?

Not only that but they then refuse to lower the interest rate when you call them up and explain to them that you have never been late paying one of their bills and have been a great customer. They really don’t care. They would even prefer that you cancel the credit card once you’ve paid it off before even considering lowering your rate! How many times have you read in entrepreneur and business articles about how it is cheaper to keep a customer than to go look for another one? I would bet a lot—a basic tenant of business 101. But this doesn’t apply to some credit card companies and banks. It is so bad that according to PBS’ Frontline:

…the word “deadbeat” has taken on a new meaning for credit card companies. For them, “deadbeat” means someone who avoids interest and fees by paying her/his account balance in full each month rather than paying the minimum amount and carrying a balance. Credit card companies do not earn much from these cardholders. About 55 million Americans pay their bills in full each month.

I’m all for less government intrusion in our lives but there are cases, like the Credit Card industry, that just scream for regulation.