Observations on life

The poor logic of fixing things

Take a look.

I have to admit, interest rates are high, on the other hand credit card debt is actually high risk unsecured debt. After falling for several years credit card delinquencies are rising again.

Using credit cards people tend to spend more and care less about what an item costs. And studies have shown that credit card spending is mostly for everyday purchases, but not necessarily necessities.

But here is the point for Sen Sanders, while it appears desirable to lower interest rates, the reality is that such a move will simply encourage more spending on credit as the interest portion of payments declines account balances will increase with the result of no change or perhaps higher monthly payments and over time higher total interest payments.

By the way, the average credit card balance from month to month is less than half the amount Sen Sander’s quotes.

Advertisements

Categories: Observations on life

Tagged as: ,

9 replies »

  1. I use credit cards for convenience and protection.I build a budgeted amount and track it daily. Read: I watch it as if it is real money, since next month, it will be an actual amount to be paid. I enjoy the cash back features of my cards,pay no fees and haven’t paid interest in quite a long time. If I have trouble with a purchase, I have protection.

    Story: Not long after Katrina, I met my soon to be wife. She had lost nearly all her furniture and had received her insurance settlement. We went and bought over $11,000 worth of furniture and put it on a card. The furniture was to arrive in 30-45 days. At about the 35th day, I found out the store went bankrupt (whoopsi). I immediately called the credit card and filed a claim. At about 60 days, the store called me and said they were shipping the furniture and I could just pay the driver using cash, check or card when it arrived. The truck arrived, and I again paid with a card. It all worked out.

    Use credit cards wisely; you’ll enjoy the benefits ~Marty Twain

    Like

  2. 17% interest cap on credit cards (regardless of credit risk) looks a lot like the PPACA 10% of wages maximum for health care coverage premiums (regardless of age, health status).

    A 17% interest rate cap also means that rates will increase for everyone whose credit history would allow for a lower rate. Remember when Congress squeezed the balloon regarding other banking services – and we saw free checking disappear.

    Watch available credit dry up with regard to those with poor credit ratings. This will definitely force those individuals to curtail their use of credit. People will spend less, in turn, the economy will slow, in turn, jobs will be lost, and unemployment (and the financial burdens it creates on taxpayers) will increase …

    Bernie will then suggest improvements in unemployment and welfare benefits.

    Like

    • Another thought. It will drive more people to payday loans with extremely high interest rates since they won’t be able to put “emergency charges” on a credit card between paychecks for people that might have been able to deal with a short term cash flow issue. But if they don’t or won’t qualify for such a low rate card, they might not have a choice but to use a payday loan.

      Like

  3. Love this article! I wish people would realize that if they planned by budgeting and saving they could avoid credit cards all together. People don’t see the need for a “Rainy Day Fund” or Emergency Savings because they’ve become too reliant on credit cards to “rescue” them when an unexpected expense arises. PLAN people! Quit walking around in the dark!

    Like

  4. What needs to happen is erase Variable rates on credit cards for those of us who have to use it. In addition, do not tie the credit card variable rate with the prime rate which has driven the interest rates above 20% One does not realize how fast the interest rate goes up, for when purchasing an item at 15% within one month the interest rate exceeds 20% so when a purchase is made at one rate, if a balance is carried rates can increase that much if unable to pay for the item within a month’s time. I for one have had to do this with the break down of household items with no extras to pay for them and car repairs and certainly have learned a lesson of this outrageous amount people have to pay for using a credit card with a variable rate. and the inability to pay the balance within a month’s time. I would be happy to see Mr. Sanders correct this unfair practice of banks.

    Like

  5. I have no idea what my credit card interest rates are because I payoff the balance every month. I have not paid a month of interest in years. Today, I am almost exclusively using my cash back credit card. I don’t like it because I know it is costing the merchants swipe fees, but I caved in because I feel I was leaving money on the table by not using my card. But if the merchants fight back, I’ll support them.

    I do not think people will buy more but more people get denied for credit calls when money and credit gets tight in the future. Lower income and people with lower credit ratings might not be able to get credit cards. When I got out of high school in 1980, you could not get a Visa card. You applied for a card at department store with the high rate of interest once you had a job. After a few years then you could get a Visa or Mastercard. By 2005 when my son went to college, banks were just giving major credit cards to college freshmen without a job. They also had higher interest rates. Today there is a whole range of rates depending on your credit worthiness.

    Although it seems like a good idea, I think that it will freeze more people out of the credit card market if the rates should climb but can’t, thus hurting those who they want to help. If the credit card companies cannot make money they will raise the fees on the merchants and those who are left.

    Like

What's your opinion on this post? Readers would like your point of view.

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s