I found myself doing mental gymnastics to follow the logic of the writer of the Las Vegas Review- Journal editorial “Credit card bill will hurt those it’s supposed to help” (Feb. 24, TribLive). After several readings, it appears to me that the writer’s logic is this:
Banks’ earnings on their credit cards come from charging the outrageous 24.21% interest, which puts many in a permanent state of rising debt as customers pay “on account” as they can each month. But if the banks’ earnings rate were to drop to a mere 10%, the number of customers who defaulted on their payments could drop from the current 14-year high of 3%, causing the bank to earn less by having fewer indentured servants going broke on their rates.
Logically then, why would banks bother to extend credit at all to these people, if they’d make so much less money? So, people would be “cut out” of the system (presumably by the banks) and be forced to find credit elsewhere, like “high-rate, short-term payday loan outfits or potentially more sordid lenders.”
My question is, what could be more high-rate and sordid than putting people in a rising debt situation by charging them 24.21% on their debt plus fees?
Linda Kramer
Harrison