Something Is Trickling Down But I Am Not Sure That I Like The Smell

A few days ago Wonks Anonymous observed that his credit card rate had gone up by at least 10% and wondered if anyone else was having this experience.

He is not alone according to USA Today. Everyone is getting credit card interest rate hikes. Reasons given in the report are:
  • Banks can get away with it. Reforms in various usury and bankruptcy laws mean that banks can charge whatever they want. If you are carrying a balance you will have a hard time going elsewhere.
  • Banks need the money to recover their balance sheets. You might think of the extra interest payments as your special patriotic contribution to strengthening America. Country First!
  • If the hike in interest rates drives you into the poorhouse banks won't suffer that much. Banks have turned your credit card debt, like your mortgage debt, into complex securities. The Bank kept the securities that pay off no matter what and sold the securities that have no value if someone defaults. If you lose they still win and in the meantime they collect more interest income.
Consumers are not always rational but we can hardly expect them to celebrate 25% interest rates by going to Target and buying hundreds of dollars of toys and other goodies for Christmas. Things are going to get worse very fast and no one in the executive branch is doing anything about it because their friends are just fine.

As a dear, departed friend of mine, Rich Auklandus, used to say: "Don't hold back Chris, tell us how you really feel."

 

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