What's with the high interest rates on credit cards?

[BadgerKid]

A large financial company sent an offer of 26.99% APR (variable). I thought banks are so awash with cash as evidenced by $1 Trillion in federal reverse repo operations.

I don't understand...well, I do actually: greedy banks preying on desperate people.

[Sherman A1]

1. One word

Greed.

[CurtEastPoint]

2. and because they all incorporate in SD which has no usury laws, apparently. Yes. GREEDY MOFOS

[Sherman A1]

3. Credit Cards can be great things

Or they can be huge problems . You have to control them or they will control you.

[CurtEastPoint]

4. Fully agree. I use 2 and pay them off in full every month.

[Sherman A1]

6. Same here

And game their rewards points programs. That said there was a time when I was on the other end of the spectrum during my first marriage and divorce. Learned my lessons and got them working for me instead of me working for them.

[multigraincracker]

8. At one time, I had to dig my way out that hole and

I said never again. One little trick I used was, If I wanted something and not sure I needed it, I would wait 3 days to decide. Most of the time, after 3 days, I didn't buy it.

[FBaggins]

5. Lack of collateral plus lousy credit

Equals high risk of loss - and therefore high interest rate to account for the likelihood that many of their customers won’t pay them back.

If your credit is bad enough that this is all that you can get, then my advice would be to not use credit cards… but sometimes you have to (car repairs, etc.)

If your credit is good, then there are much better cards with no interest for a year or more and rates as low as about 12%

Of course, if you use credit cards for convenience and not borrowing, you don’t care what the rate is because you never pay any interest,

[3Hotdogs]

7. I was on the credit card train for years.... too many years.

They will all be paid off in eleven months. Shit I bought with the cards... well, I really didn't need them anyway. Impulse buying... Its on the screen. If I don't buy it now, it may never be on the screen again.

or "3 day special with free shipping."


I cut the four cards in half and live on the debit card.

[nwliberalkiwi]

9. Company Greed

We had a credit card with 8.7% rate. We had made some purchases on the card for a total of about $1,200 dollars. Credit card company raised our rates reto actively to 17.99%. We promptly paid off the card, and returned the cut-up card with a nasty note. These credit card companies are nothing but parasites!!!

[Tadpole Raisin]

10. After college I managed to get a Sears card with a $250 credit limit.

It took 2 more years of proving my credit worthiness to get a MC w/ $500 limit. Back then they almost served as a parent to keep you from overextending yourself during those critical years in your young adulthood and they knew they were making a decent profit.

Fast forward to graduate school, well after Reagan was in office and when going to the BU bookstore I found they put several credit card offers in my bag of purchases. I asked why they did that (so damn naive) and I got a strange look.

Later at home I looked over the offers and got a sinking feeling. If I had been given this after college I could have gotten myself in a lot of trouble. Seeing this dramatic change in credit being thrown at people I knew this was not going to end well. My rule was if I wanted something ask 3 questions: do I want it? (That’s easy) Do I need it? Can I afford it? One ‘no’ put the kabash on most purchases.

Loosening credit by itself was not the problem. It was how it was done. Everything became more expensive.

Can’t afford that appliance? Don’t wait and save, put it on your card!
Can’t afford college, a car, a house? No worries - take a loan out. They used to say you could afford a house that was up to 3x your income. Now? You’d be lucky to find a tear down home in a lot of areas.

Easy credit has been the worst thing for the average consumer.

Yes I am a CC deadbeat and proud of it!!

[calguy]

11. High interest can easily be avoided

Don't spend more than you earn.
Pay your balance every month.

[SWBTATTReg]

12. People need to become their own 'credit cards'...if one just waits for a few months instead of ...

immediately buying desired items, by putting aside cash into savings themselves each month, then they have the reserve of cash themselves to buy such items. I did like the suggestion of one DUer in this trend that suggested waiting 3 days before deciding to buy or not buy something.

Think of it this way, you are paying yourself instead of the credit card companies/banks/etc. that interest, after all, you can't get a decent rate on CDs now, but you can get a decent rate by paying yourself the 26.99% interest rate instead of to someone else. Save for at least six months (saving for longer than six months is preferred and you'll immediately notice the freedom that you have by control of your finances, not the banks controlling your finances).

Once you get to this 'break even' point by saving money/not spending money for a relatively short period of time, you'll be far more better, financially-wise, from that point on, if you continue this financial discipline.

[PoindexterOglethorpe]

13. You just now noticed?

These high interest rates have been on the cards for decades, pretty much from the beginning.

I have one credit card and I pay it off every month. Not having a credit card at all is not a good idea, because some genuine crisis could occur and you'll need one for that emergency. Plus, even if you plan to pay cash at the end, things like hotels and rental car companies require a credit card.

[Tomconroy]

14. You will never be rich unless you save. You will never save unless you spend less

Than you earn. Avoid credit card debt at all costs.
If you master those three the rest is comparatively easy.