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The Cost of Credit
06/07/2009 - By David Hoschouer
I was working on a project at my office when my Mom suddenly appeared. She was very upset. Through a cloud of disbelief she managed to show me her latest credit card statement. Her interest rate went from a low 4 % all the way up to 36 % overnight. At fir
It’s no wonder why so many people are filling for bankruptcy these days. As far as I’m concerned the lenders who are practicing this new trend of raising interest’s rates on unsuspecting borrowers deserve nothing less than to get stiffed.
The Senate has rejected a limit on Credit-Card Interest Rates. Despite complaints that banks and credit card companies are gouging customers by charging outrageous interest rates, the Senate on Wednesday easily turned back an effort to cap interest rates at 15 percent.
The effort by Senator Bernie Sanders, the Vermont independent, drew only 33 votes and needed 60, with a bipartisan group of 60 senators opposing it as the Senate pushed it's credit card overhaul toward the finish line. Some Democrats and consumer groups have said that an interest cap is needed to put real teeth into an otherwise solid bill. Other backers of the measure calculated that an interest rate ceiling would doom the popular legislation.
The banking industry, which had some heavy-weight representatives monitoring the vote off of the Senate floor, warned that an interest rate limit could cause a sour reaction in the financial markets. But Mr. Sanders said the card companies and banks were engaged in conduct that could get others hauled into court. He said one-third of all credit card holders are paying interest above 20 percent and as high as 41 percent. “When banks are charging 30 percent interest rates, they are not making credit available,” said Mr. Sanders, who noted credit unions are limited to 15 percent. “They are engaged in loan-sharking.”
After the effort failed, Senator Christopher J. Dodd of Connecticut, the Democratic chairman of the banking committee, proposed that the Federal Reserve be asked to provide an analysis of how Congress could rein in interest rates. Senators said they hoped to finish up the credit card bill as early as Thursday, coinciding with a town hall meeting by President Obama on credit card issues in New Mexico. By time someone gets around to ratifying these issues allot of people will have ended up with a really sore backside! What a @#$%ing joke.
When you look at the cost of credit from outside the optimal box you can’t help but to see the numbers. Over time the cost is staggering. The cost of credit is the additional amount, over and above the amount borrowed, that the borrower has to pay. It includes inteset, arrangement fees and any other charges. Some costs are mandatory, required by the lender as an integral part of the credit agreement. Interest and other charges are presented in a variety of different ways, but under many legislative regimes lenders are required to quote all mandatory charges in the form of an annual percentage rate (APR). The goal of the APR calculation is to promote ‘truth in lending’, to give potential borrowers a clear measure of the true cost of borrowing and to allow a comparison to be made between competing products. The APR is derived from the pattern of advances and repayments made during the agreement. Optional charges are not included in the APR calculation.
So what’s the bottom line here? Interest, fees, and who knows what’s coming next, basically relates needs and wants of people are profitable. Or were… The bible relates it’s wrong to charge your fellow man interest. Therefore I ask myself the big question. If my next credit card statement says my interest rate has tripled what will I do? What can or should I do? Pay it or tell them to pound it… Either way I lose. Perhaps the only way to win the Credit Game is simply not to play it.
The Cost of Crdit, "To pay or not to play."
