4 ms·

Bernie Sanders interest-rate cap could end credit-card rewards programs

15 points by xivzgrev 7y ago

rando444 7y ago
I live in a country where credit cards can't carry a balance. Everyone pays them off every month. If you need a loan, you ask the bank. In the absence of credit card interest rates, we pay yearly fees for cards depending on the rewards offered by each. It's kind of the best of all worlds if you ask me.
- sethgecko 7y ago
  What if you don’t pay?
  - ddingus 7y ago
    Seems simple. No credit, until you do.
    - sethgecko 7y ago
      But then you carry a balance
      - ddingus 7y ago
        Not when the law says differently.
  - rando444 7y ago
    If you can't pay your bill in full, you work out a plan with your bank to pay your debt back over time. Your credit card limit was already determined by your income, so the possibility for individuals to get themselves into financial trouble is rather low.
xivzgrev 7y ago
More importantly it could end credit card access to subprime members. There already aren’t a lot of cards to build (or rebuild) your credit. It is possible that issuers would respond by replacing with secured cards but consumers hate those and introduces a lot more friction into process.
- HarryHirsch 7y ago
  There already aren’t a lot of cards to build (or rebuild) your credit. I never understood that. You'd think that creditworthiness means that you have a habit of paying your bills on time, and that your scheduled payments are in proportion to your income. Nothing more. But in America they insist that you have a credit card and have a history of paying that. It's a problem when you are a recent immigrant and seek to get a mortgage because you'd like to settle in a certain town. If the Sanders proposal does something about that craziness I'm all in favour.
oil25 7y ago
Lots of speculation, mostly from owners of Web sites which profit off marketing credit cards. The article tries to claim that low-interest loans are BAD for consumers because they "generally set at a higher amount each month". Do they really expect any intelligent person to believe this shit?
- HarryHirsch 7y ago
  Do they really expect any intelligent person to believe this shit? The Fox News commentariat will swallow it wholesale, and they are more numerous.
  - girlsrule1234 7y ago
    Are they more numerous, though? I don’t know, but recall that Dems did win the popular vote. More vocal and likely to act in a coordinated effort? Unfortunately, probably.
  - writepub 7y ago
    But are MSNBC viewers likely to believe their decision making is somehow not their fault, and routinely choose loan shark-esque credit?
konschubert 7y ago
Credit card rewards create a very bad incentive because they push consumers to choose cards with high merchant fees, who then have to rise their prices and make everybody pay the bill. Thus creating a race to the bottom with ever-increasing credit card fees.
- sitkack 7y ago
  This needs to be stated in more ways. Credit cards themselves encourage inflation (credit card fees, offset payments, lack of savings to pay for goods). And those same rewards programs are paid for with merchant fees, further encouraging price inflation.
- edbaskerville 7y ago
  Yes! We should simply make credit card rewards illegal in a more direct way. Effectively, people with low-paying rewards cards—and people paying in cash—are subsidizing people with high-paying rewards cards. In other words, credit card rewards are yet another wealth transfer from poorer people to wealthier people.
olliej 7y ago
And that is bad because..? Credit card reward programs exist to encourage spending on massively over market interest rates. Also, capping the interest rate doesn’t reduce the benefit to making encouraging people to spend and carry debt, so I doubt they’ll go away.
- gizmo686 7y ago
  >Also, capping the interest rate doesn’t reduce the benefit to making encouraging people to spend and carry debt, so I doubt they’ll go away. That is exactly what it does. The benefit to people carrying debt is the interest they pay. If you reduce the interest rate, you reduce that benifit.
- chrisseaton 7y ago
  > Credit card reward programs exist to encourage spending on massively over market interest rates. More charitably, they exist to encourage you to spend what you'd spend anyway, but on their particular card.
badhombrehn 7y ago
Russia, North Korea, Venezuela, the parasitic religion of Marxism is ruining one country after another, under the disguise of do-gooding and virtue signaling. The USA is next.
willio58 7y ago
Good. Credit card rewards are great for the few people who have enough self control to not get into debt, but terrible for everyone else. They drive people into a spiral of debt.
liamcardenas 7y ago
For what it’s worth, it took me a long time to raise money for my startup. Throughout that process, I relied heavily on my credit cards. I don’t believe this would have been possible without high interest rates. I took a calculated risk.

15 points by xivzgrev 7y ago

I live in a country where credit cards can't carry a balance. Everyone pays them off every month. If you need a loan, you ask the bank. In the absence of credit card interest rates, we pay yearly fees for cards depending on the rewards offered by each. It's kind of the best of all worlds if you ask me.

sethgecko 7y ago
What if you don’t pay?
- ddingus 7y ago
  Seems simple. No credit, until you do.
  - sethgecko 7y ago
    But then you carry a balance
    - ddingus 7y ago
      Not when the law says differently.
- rando444 7y ago
  If you can't pay your bill in full, you work out a plan with your bank to pay your debt back over time. Your credit card limit was already determined by your income, so the possibility for individuals to get themselves into financial trouble is rather low.

xivzgrev 7y ago

More importantly it could end credit card access to subprime members. There already aren’t a lot of cards to build (or rebuild) your credit. It is possible that issuers would respond by replacing with secured cards but consumers hate those and introduces a lot more friction into process.

HarryHirsch 7y ago
There already aren’t a lot of cards to build (or rebuild) your credit. I never understood that. You'd think that creditworthiness means that you have a habit of paying your bills on time, and that your scheduled payments are in proportion to your income. Nothing more. But in America they insist that you have a credit card and have a history of paying that. It's a problem when you are a recent immigrant and seek to get a mortgage because you'd like to settle in a certain town. If the Sanders proposal does something about that craziness I'm all in favour.

oil25 7y ago

Lots of speculation, mostly from owners of Web sites which profit off marketing credit cards. The article tries to claim that low-interest loans are BAD for consumers because they "generally set at a higher amount each month". Do they really expect any intelligent person to believe this shit?

HarryHirsch 7y ago
Do they really expect any intelligent person to believe this shit? The Fox News commentariat will swallow it wholesale, and they are more numerous.
- girlsrule1234 7y ago
  Are they more numerous, though? I don’t know, but recall that Dems did win the popular vote. More vocal and likely to act in a coordinated effort? Unfortunately, probably.
- writepub 7y ago
  But are MSNBC viewers likely to believe their decision making is somehow not their fault, and routinely choose loan shark-esque credit?

konschubert 7y ago

Credit card rewards create a very bad incentive because they push consumers to choose cards with high merchant fees, who then have to rise their prices and make everybody pay the bill. Thus creating a race to the bottom with ever-increasing credit card fees.

sitkack 7y ago
This needs to be stated in more ways. Credit cards themselves encourage inflation (credit card fees, offset payments, lack of savings to pay for goods). And those same rewards programs are paid for with merchant fees, further encouraging price inflation.
edbaskerville 7y ago
Yes! We should simply make credit card rewards illegal in a more direct way. Effectively, people with low-paying rewards cards—and people paying in cash—are subsidizing people with high-paying rewards cards. In other words, credit card rewards are yet another wealth transfer from poorer people to wealthier people.

olliej 7y ago

And that is bad because..? Credit card reward programs exist to encourage spending on massively over market interest rates. Also, capping the interest rate doesn’t reduce the benefit to making encouraging people to spend and carry debt, so I doubt they’ll go away.

gizmo686 7y ago
>Also, capping the interest rate doesn’t reduce the benefit to making encouraging people to spend and carry debt, so I doubt they’ll go away. That is exactly what it does. The benefit to people carrying debt is the interest they pay. If you reduce the interest rate, you reduce that benifit.
chrisseaton 7y ago
> Credit card reward programs exist to encourage spending on massively over market interest rates. More charitably, they exist to encourage you to spend what you'd spend anyway, but on their particular card.

badhombrehn 7y ago

Russia, North Korea, Venezuela, the parasitic religion of Marxism is ruining one country after another, under the disguise of do-gooding and virtue signaling. The USA is next.

willio58 7y ago

Good. Credit card rewards are great for the few people who have enough self control to not get into debt, but terrible for everyone else. They drive people into a spiral of debt.

liamcardenas 7y ago

For what it’s worth, it took me a long time to raise money for my startup. Throughout that process, I relied heavily on my credit cards. I don’t believe this would have been possible without high interest rates. I took a calculated risk.