After listening to the rapacious credit card industry whine and cry and hew over the prospect of some regulation that will reel them back from their semi-usarous ways, I was struck by a thought. One so obvious that I don’t know why there is no media discussion of it.
During the artificial price spike in gas last Spring and Summer, pundits were going on about how ‘high gas prices are a good thing’ because they change consumer behavior. By the same logic, why aren’t high credit card interest rates a good thing, because they should prevent consumers from over spending? If credit card companies what to react to regulation buy jacking up rates and fees, so be it. There will always be one or two who won’t and that is were consumers will take their business.
Of course, credit card companies have already proven that they don’t operate on a rational basis anyway. Personal example: I had a credit card with CapitalOne for over 20 years, used it regularly, paid it off every month with great consistency. My reward for that was that they first changed my fixed rate to a variable rate (effectively doubling it), then doubled it again while simultaneously shortening the payment period to 15 days. All of these changes were though no actions of my own. When I called a CapitalOne rep to ask why the changes were made the response was ‘I am sure it was done for a good reason’. When I pressed the matter, her supervisor basically said ‘if you disagree with the changes you can always stop using your card — would you like me to cancel it now for you?’ Thank you for your years of patronage, shall I poke your other eye out, now?
To answer my own question, the reason why high credit card rates won’t have the same effect is because the impact is deferred. The purchase is made and the balance goes up on next month’s bill, with very little friction. However, at the pump, it is very real as you watch the numbers click by for you $100 fuel up — do that twice a week and it really drives it home.