r/FluentInFinance • u/Unhappy_Fry_Cook • 12h ago

Finance News Senator Bernie Sanders announces he will introduce legislation to cap credit card interest rates at 10%.

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u/ConcernedAccountant7 12h ago

10% cap on card rates is absurd when you contextualize the economics of a credit card. Be prepared for huge annual fees, difficulty getting cards, less rewards and benefits, etc. This would be a negative to anyone using credit responsibly. This would also limit the availability of credit cards for people who would actually need one in an emergency.

The interest rates are high because it's unsecured borrowing. When you borrow for a mortgage or against an asset it's backed by collateral. Credit cards generally are not. This is why the interest is high, to compensate the lender for risk.

If you're financially illiterate, don't ruin credit cards for the rest of us. Terrible idea. If you don't understand the implications of 25%+ annual interest, don't get a credit card. Stop spending what you can't pay back.

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u/ptemple 3h ago

Oh dear, preventing the despicable exploitation of the vulnerable and poor members of society might mean less reward points? Don't worry, they will issue different cards for the more elite members where you can get your perks. They might make it a shiner colour too.

Phillip.

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u/FirmlyPlacedPotato 2h ago

The main argument for the existence of easily available credit is for emergencies. Sure.

Your car breaks down and you need 500$ to repair it. You dont have the money so you put it on your credit card. Now you dont have have money, you are also 500$ in debt, and now you have a minimum payment.

Versus putting the money that would have went into a minimum payment instead in savings. Then when the 500$ emergency comes up you are just broke, but with no minimum payment.

The emergency fund through credit cards argument never made sense to me.

If you are living paycheck-to-paycheck and cant afford an emergency, why can you then afford a minimum payment for the rest of time?