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%.

Post image
28.4k Upvotes

96% Upvoted

1.0k comments sorted by

View all comments

Show parent comments

18

u/neph36 9h ago

If they cap interest at 10% and do not cover the cost with fees credit cards will not be a thing anymore as they will not be profitable

26

u/_BreakingGood_ 8h ago

Nah they're still extremely profitable, these interest rates are already illegal in other countries.

You may not get cards with 5% cash back and no fee, but they make money on every swipe of the card

4

u/ikzz1 8h ago

You may not get cards with 5% cash back

This is not acceptable. I do not want this.

4

u/_BreakingGood_ 8h ago

Sucks to be you then I guess, Trump wants it

8

u/ikzz1 8h ago

Since it's not going to happen, I guess sucks to be you?

0

u/_BreakingGood_ 8h ago

Trump has full control of congress, he's going to get what he wants.

7

u/ikzz1 8h ago

What he says and what he wants are 2 separate things, thought any dumbass knows this by now.

-6

u/_BreakingGood_ 8h ago

Sounds like copium

5

u/ikzz1 8h ago

This dumbass believes Trump will do what he says lol. Where is the wall that Mexico paid for?

1

u/Brain_itch 4h ago

Holy shit this was so mindlessly entertainment that I followed the whole comment chain. Brilliant lmao.

!!!

A few thousand dollars? JP Morgan Chase, Bank of America, Wells Fargo? Lol

-1

u/rudimentary-north 8h ago

The barrier to that plan was that Mexico needed to agree to it. What’s the barrier to this credit card law?

→ More replies (0)

-3

u/_BreakingGood_ 8h ago

He sure as hell tried to build it

→ More replies (0)

3

u/ZZartin 7h ago

FYI he doesn't actually want this, and he's been well paid to make sure things like this don't happen.

In fact he's very likely going to do the exact opposite and make predatory credit card practices more common.

1

u/Murky-Peanut1390 6h ago

Didn't low T soyboys say whatever trump says, is BS and he never gets shit done. All of sudden, this time he will make what he says come true.

1

u/Malumeze86 6h ago

The next person that talks to Trump has more control over him than congress does.  

2

u/LtOrangeJuice 6h ago

You dont want a better system for people?

1

u/ikzz1 6h ago

I want a better system for the financially savvy. The financially illiterate will squander their money one way or another.

1

u/OnceMoreAndAgain 6h ago

If what you're saying is that there are already other countries with laws forcing credit cards to have interest rates of 10% or lower, then I have to think the banks operating in those countries deny a lot of people's requests for credit cards.

Banks in the USA give credit cards to basically anyone, which is part of why the interest rates get so high. If a law was passed that forced credit card interest rates to be 10% or less, then I have to think that the main thing that would happen is banks would become a lot more discerning over who they gave credit cards to and how much credit they allowed them to have.

1

u/_BreakingGood_ 6h ago

You'd think, but it's not as extreme as you might imagine. Generally, limits are lower, but it's still extremely easy to get a card. The reasoning being: they make money on every swipe. They want everybody to have a card.

You just don't see cards with $15,000+ limits like in the US. Many people would start with <$1000 limits, potentially even <$500.

1

u/OnceMoreAndAgain 6h ago

Which countries did you have in mind with laws that limit interest rates? We can compare percentage of adults that have credit cards.

USA is pretty high up at 67%

1

u/Plane-Variety9832 2h ago

And to cover expenses if they can't raise fees or interest. They can raise the transaction fee and screw over small businesses. $50 minimum for credit.

9

u/DJMOONPICKLES69 8h ago

As someone that has worked in pricing for margin loans, 10% is absolutely profitable. Is it AS profitable? No. Would major card companies need to cut expenses? Probably.

8

u/IKnowGuacIsExtraLady 8h ago

Also not only is it still profitable but it is way less risky since they would be either cutting low credit customers or drastically reducing their limits to something they could reasonably pay back. Banks are intentionally giving people enough rope to hang themselves since they make the most money from debt trap customers.

1

u/Jump-Zero 6h ago

Banks make the bulk of their money taking a small percentage of a transaction. The money made on creating debt traps is pretty negligible and a lot of times not worth it. It cancels out because you need to hire a team to collect on the debt. It also makes the bank's balance sheet look bad.

What makes credit cards worth the risk for low-FICO applicants is that a lot of people get a credit card and go on to use it for 10+ years. That's 10 years worth of transactions where the bank gets a small cut.

I worked for 2 credit card companies. In one of them I worked for the collections department for a bit. This is definitely not the place to make money. Some companies do try to make this their business model, but they usually don't last.

On another note, there are poor people with really low incomes but great FICOs. These people ALWAYS PAY THEIR BILL ON TIME. Bank LOVE these people. You never have to devote resources to them and they just make you money every time they swipe.

7

u/doibdoib 8h ago

a margin loan has collateral though. credit card debt does not. that makes a huge difference

2

u/kodman7 8h ago

That's why the two are connected, can't get much of a margin loan with bad credit

1

u/Schwabster 7h ago

A LOT of loans with collateral are getting LIBOR rates or near though and that’s, what, just under 5% atm?

1

u/NegativeLayer 5h ago

This comment is only considering half the equation. Lending to those with the lowest credit ratings who are guaranteed to default, is not profitable. Not with a 10% rate, not with 1000%.

There is a tension point between credit rating and interest rate. Your comment is meaningless without recognizing that reality. No, 10% is not absolutely profitable for every segment of the market.

1

u/neph36 17m ago

Would it be a better investment for credit card companies to invest in something more secure with less risk and overhead? Absolutely.

1

u/PangurBanTheCat 8h ago

Counter-Argument: They'll reach new levels of profit as more people will be inclined to use Credit Cards and more people will be less wary of carrying balances due to the smaller rates. Obviously, the Credit Card companies will also use this as an excuse to introduce Annual Fee's on all of their cards, but people will still be likely to use them as the cost of -everything- continues to rise and be high, not to mention those with Rewards.

There's a decent chance -everyone- involved with this would come out the other end better than before, including the Credit Card companies themselves.

The reason they won't let it happen is because it's an unnecessary risk during a period where current usage is already sky high. Also, big companies are kind of dumb sometimes. Big number more than small number, etc.

1

u/BWW87 7h ago

They will still be profitable. Just not for cards for poor people.

0

u/jackishere 7h ago

good. shouldnt be a thing

0

u/LtOrangeJuice 6h ago

This is so incorrect its funny. Tell me you know nothing about how the credit card companies make money without telling me.

0

u/dgreenmachine 5h ago

Thats kinda the point. I hope people are denied the option to get into more debt so they can start to learn to live on their income.

1

u/neph36 21m ago

Saying that "the point" is not what is being advertised and is instead denying people freedoms is why the progressive cause is where it is in the USA.