Why are you paying 18%, when banks are getting their loans at 0%? | Credit Lifesaver

January - 2009

Why are you paying 18%, when banks are getting their loans at 0%?

Monday evening , January 26, 2009.


Supreme Court Usury Law Dismissal. 1978.
Courtesy New York Times.

I think it’s a fair question.

Not long ago, depending on the state, lending at more than 6, 8, 12 or 16% interest rate was illegal, —the crime was called usury.

Yes, of course, inflation eroded part of the loan returns, but nowadays we’re going through a deflationary period.

So, why are we still paying 14, 17, 18… and even 32%?

Current bank losses highlight their misguided management policies. It’s time to stop banks’ “push it down their throat” policy. Their misfortune is also the opportunity to arrive to fair agreements. Tobacco companies are disappearing because their products harm people. Why can’t we banish usury? It’s time we stand our ground. For God’s sake, our taxpayer dollars are bailing them out, it’s time we demand from Congress to stop the abuse. Fight back! 

Bankers will probably quip: “No one is putting a gun to your back to have you accept credit cards.”

But, why the insistence?

During 2005 banks mailed 6 billion mail pieces to promote their offers and the leading card companies each spent to the tune of $300 to $400 million in advertising:

  • Visa’s “Everywhere you want to be” and “Life takes Visa.”
  • Mastecard’s “There are some things money can’t buy. For everything else there’s Mastercard.”
  • American Express’ “My life. My card.”

Why the barrage of limited time offers with a low interest rate hook?

It so happens that if you miss a payment, or misplace a bill, or lose it altogether, there is hell to pay: late fees, plus a penalty interest rate, from 23 up to 32%. And, it doesn’t end there, that late payment may also trigger penalty interest rates on your other cards —which is in the fine print of those other Trojan cards agreements. Check this sad 2005 article from Consumer Reports.

Did you know that 35% of all credit card holders are late to pay at least one monthly payment during a given year, and that the average penalty fee is $30.95? Did you know that during 2007 banks collected $18.1 billion in credit card late penalty fees, approximately half of the industry’s $40.7 billion in profits.

It sure looks like a trap which is very lucrative for banks.

Customer representatives speak out. Courtesy of Americans for Fairness in Lending.

How can banks justify charging someone 30%, when this rate is certain to ruin anyone? It’s evil.

And, the abuse doesn’t stop here. Banks finance lobbyists with their unfair profits to further their excruciating practices. During 2005, legislators modified bankruptcy law in their favor, when visionary bankers saw the huge tidal wave of credit card defaults in the horizon.

Current bank losses highlight their misguided management policies. It’s time to stop banks’ “push it down their throat” policy. Their misfortune is also the opportunity to arrive to fair agreements. Tobacco companies are disappearing because their products harm people. Why can’t we banish usury? It’s time we stand our ground. For God’s sake, our taxpayer dollars are bailing them out, it’s time we demand from Congress to stop the abuse. Fight back!

It’s not going to be easy. We’ll need to stay on our toes to support all favorable legislation and to learn what works to negotiate with these unscrupulous lenders.

If you have any misgivings, just remind yourself that they’re getting billions at 0% interest rate for their mistakes, and that your probably paying 30% for yours…

Let’s stay informed!

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