How is it a bad thing you ask? Easy, credit counseling, not credit interest rate cuts are needed. One thing I do agree with Sen Elizabeth Warren on is banks and credit companies take advantage of some of the most downtrodden and down on their luck individuals. They also prey on folks who should not even have a card to begin with.
Folk’s it may sound anti-business, but I do not think it’s right for a credit card company to be on a college campus hawking its products. Students, by and large, do not have an income, this is purely designed as a trap. Give them a card with $500 or so limit, get them to charge a bunch of fast food and booze, then tell them the minimum payment is all that’s required. Then when they hit the limit, either raise it, or charge over the limit fees. Then the higher interest kicks in and the minimum payment doesn’t even touch the principal. Countless lives have been ruined by these cards. Adults, families, and college age people by the way, credit cards do not discriminate.
So why is it bad to lower interest rates? It’s temporary relief, not the answer to the question. We are, in essence, rewarding bad behavior. I know some folks will be able to pay these cards off, but many more should also be closing them out. Pay in full and close them out? HA. This feels like an excuse to keep people spending once paid off, due to low interest rates compared to what they were paying. Not everyone needs to go to college and not everyone needs a credit card.
What do people need?
Credit counseling. Its not allowed in school as part of a budget class because it was deemed racist by the older generation. Not sure how budgeting is racist, but that maneuver has created a massive issue with the younger and some older generations. Credit cards, especially store cards, are far too easy to come by. While I do not think the interest rate should be allowed to touch 35%, I am not sure what the maximum should be.
On cards, I stick to what Dave Ramsey says; in essence you do not and should not need one. If you get one or more, like I have, be sure to pay them off in full each month, never spending more than you should. Differentiate between a need and a want. Sure, the points or miles are cool, but no one has gotten rich of credit card points… no one. Sure, it’s nice to earn a couple few hundred a year, but I do not have credit cards for that reason. Yes, its true people who get credit cards often overspend to earn extra “points” just remember folks 5% in rewards is $.05 per dollar spent, it’s not like you are coming out ahead.
My bigger issue is Donald Trump cannot do what he wants to do legally. Sure, he can sign an Executive Order, but will it stand the test of time? It appears to me to be blatantly unconstitutional. Time will tell, I guess.
My final thoughts are why do we no longer teach people about credit? Dave Ramsey is spot on when it comes to this. It’s the same with pay day lenders, pawn shops, and hard money lenders. Folks need to know what they are getting into, in the form of a class, via the internet or in person. Folks need to know how these financial vehicles work and what they could end up paying, not in the form of legal mumbo jumbo on their bill.
The Chief