Forum Post: Credit Card Interest Rate Limitation for 3 to 5 years important.
Posted 13 years ago on Oct. 10, 2011, 12:03 p.m. EST by allfedup
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Another demand that OCW should make is for legislation on limitation of interest rates on credit cards. It would be reasonable to limit interest rates on credit card for 3 to 5 years especially after banks go free bailouts. A lot of people out there these days have had their interest rates on credit cards jacked up grater than 25%. Interest rates should be limited to 15% on anybody's credit card on old balance that existed prior to July 1, 2011. A three to five year rate limit moratorium will give people a fair window of opportunity to pay off old credit card balances much faster and help get the economy recover faster.
I think it is important to note here that when we loan the bank our money (in the form of checking and savings deposits), we are currently earning a maximum 1% return (http://www.savingsaccounts.com/). When the banks turn around and loan our money out to our friends and neighbors, they charge them on average 14.97% (http://www.creditcards.com/credit-card-news/credit-card-interest-rate-report-1005-record-1276.php), and can charge up to 29.9%. Why are we only getting 1%? It's our money they are loaning out. I understand that individual deposit accounts don't necessarily make up a huge portion of what they are lending, but why the huge difference in rates? Isn't that the same as a distributor buying a hand made item from a craftsman for 1$ and selling it for $30? That's absurd. I think the cap on interest rates should be dropped to 5%.
The whole point I am trying to make of this is that the credit card companies should be forced by law limit interest rates long enough to give the average person a chance to pay off old credit card balances at a reasonable rate. One of the problems in the economy right now is so many people are saddled with debt on credit cards at ridiculously high interest rates that it can take quite a long time to get rid of it. Congress must have legislation to reduce the major burden on so many people. I wish there would be a cap of 5%(!), but I am trying to be realistic about what might be agreed to. Perhaps a 10%-15% cap for 3 to 5 years might be compromise that is achievable by legislation.