Banking Reform: How A Credit Card Interest Rate Cap Can Make Things Even Worse

Introduction

Desire to buy more than one can afford, economic uncertainty and unforeseen emergencies are a few reasons as to why more and more people are falling deep into credit card debt. Life style that is way beyond one’s earning power is often the main cause for millions of citizens the world over to face huge financial problems. Very often borrowers fail to realize that the plastic that gives them access to cash is not their own and they are just borrowing money that is not theirs.

History

People are turning to credit card consultants to get relief from their debt burden. These consultants, for a fee, help consolidate all the credit card debts and give advice to pay them off in regular installments. This however is easier said than done because the amount to be repaid is often high. The individual will have to stop buying products or services with his credit card, even during emergencies.

The government often formulates rules and regulations to safe guard the interests of the credit card holders. One such bill passed recently in the congress proposes to impose a cap on the banking rates that are charged by all the credit card companies. It proposes to half the maximum banking rate charged by the banks. The bill wants to have an upper limit of 15% APR. This cap will make things easier for the average credit card user and they will be able to pay the loans more easily.

This however may not be true and can actually harm credit card users. Credit card companies take into account various factors before fixing the banking rate. A person’s credit score and payment history are a few important factors that are taken into account before deciding the banking rates for him. A person who does not default in his payments is usually not charged over 13.99 % APR. The debtors who miss payments regularly are the ones who are often charged more.

Features

If the bill gets ratified and the credit card banks reduce the banking rates then there is every likelihood that the regular defaulters and irregular payment makers will get their credit card cancelled. As banks are not charitable institutions they will cancel the credit cards if they are unable to earn much from their loans.

Everyone wants to have a lower interest rate credit card loan and a card that offers a lower banking rate is the most sought after. But as a low credit card inertest rate often depends on the individual looking for one it is important to improve one’s credit score. Paying of all the credit card payments by consolidating all the debts as one, learning to be a spendthrift, etc, will help get a good banking rate.

There are many small credit card companies that offer less banking rate when compared to the big established ones. Going online and doing a little research by gathering information is the best way to find credit card companies that offer less banking rate.

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