Caps on credit card rates?

Smallc · March 31, 2011

Credit card companies don't issue credit, banks do.

Bob · March 31, 2011

Easy to say. There are one heck of a lot of people that are having to use credit to feed their families. Yes, sure there are those that abuse it, but you can't use such a broad brush.

An even better idea would be to fund and offer financial classes in secondary school.

I agree 100%. We really, really, really need this to become an essential component of basic education.

Bob · March 31, 2011

Credit card companies don't issue credit, banks do.

I used the term in a general sense. And it's not always via banks (i.e. credit issued from stores like Best Buy, or third parties). Look man, I worked in the financial industry for years. I used the general term because I didn't think you knew the difference.... sorry for underestimating you.

Jack Weber · March 31, 2011

Credit card companies don't issue credit, banks do.

And therein lies the problem with these different interest rates..

punked · March 31, 2011

The problem here is people are arguing like the Credit Card companies and the Banks are lending their own money. They aren't they are lending money which they are lent at an interest rate that is .75% right now. MasterCard could lend a Trillion dollars and make 100 million a year off of it because they don't need that Trillion in Capital they just got the Bank of Canada and say this is how much money I need to lend it out to the Canadian people. It is our money we should get a say.

Bob · March 31, 2011

Credit card companies don't issue credit, banks do.

Anyways, you're not addressing the point. Do you seriously think this is a good idea? It's completely contrary to common sense and basic economics.

punked · March 31, 2011

It makes no sense, whatsoever. The banks would just raise rates somewhere else (bank fees, mortgages, lines of credit, loans, institutional services, etc). You can't set a limit on how much money a corporation can make in this manner.

Yes you can infact Part of the NDP party platform is bank fees. As for mortgages etc, most of those originally come from the government in the first place.

Bob · March 31, 2011

Yes you can infact Part of the NDP party platform is bank fees. As for mortgages etc, most of those originally come from the government in the first place.

But see, this is ridiculous. They'll just make the money somewhere else. You can't tell a corporation they're making too much money, especially not in a competitive environment. Yes, base mortgage rates are set by the Bank of Canada, but there's still some competition at the macro level. More importantly, the premium a borrower pays is based on the risk posed to the lender. If you set a limit, you'd eliminate credit solutions for higher-risk (bad credit history) customers. It's just populist shit going after those "rich bankers and corporate executives". He's pandering to those who are resentful of success, when they should be resentful of policies such as this and ideologies such as Jack Layton's.

punked · March 31, 2011

But see, this is ridiculous. They'll just make the money somewhere else. You can't tell a corporation they're making too much money, especially not in a competitive environment. Yes, base mortgage rates are set by the Bank of Canada, but there's still some competition at the macro level. More importantly, the premium a borrower pays is based on the risk posed to the lender. If you set a limit, you'd eliminate credit solutions for higher-risk (bad credit history) customers. It's just populist shit going after those "rich bankers and corporate executives". He's pandering to those who are resentful of success, when they should be resentful of policies such as this and ideologies such as Jack Layton's.

No one is saying they are making to much money, what they are however saying is "you borrow money from us at 0% interest than we will attach strings to it." If the banks want to find their own capital that is fine however if they want the governments money they have to be ready to play by the governments rules.

I will tell you right now the banks that want to grow big will borrow that government capital with very little interest or they will need to find a new model.

If you think this wrong that is fine, I think if you want to borrow the peoples money the people should have a say in the criteria for taking that money. It seems like a very fair position.

Bob · March 31, 2011

No one is saying they are making to much money, what they are however saying is "you borrow money from us at 0% interest than we will attach strings to it." If the banks want to find their own capital that is fine however if they want the governments money they have to be ready to play by the governments rules.

I will tell you right now the banks that want to grow big will borrow that government capital with very little interest or they will need to find a new model.

If you think this wrong that is fine, I think if you want to borrow the peoples money the people should have a say in the criteria for taking that money. It seems like a very fair position.

You don't understand how the system works. It's certainly not so simple as "borrowing the people's money". Anyways, banks are heavily regulated as it is. There already are strings attached - it's called competition. Credit card interest rates aren't really a problem in Canada. It seems clear to me that the kind of person that is interested in having credit card interest rates reduced is an irresponsible person who doesn't manage his or her financed properly... the kinda person that would vote for Jack Layton.

Smallc · March 31, 2011

I used the term in a general sense. And it's not always via banks (i.e. credit issued from stores like Best Buy, or third parties).

You're right, I should have said financial institutions. Next week sometimes (thereabout), I'll be part owner of a very successful retail business...I know a few things, though I don't know everything.

Bob · March 31, 2011

You're right, I should have said financial institutions. Next week sometimes (thereabout), I'll be part owner of a very successful retail business...I know a few things, though I don't know everything.

I'm still surprised you think it'd a good idea to put a cap on credit card rates rather then letting the market resolve that on its own. There are many low(-ish) credit card rates available to people with good credit histories. Most importantly, responsible credit card usage shouldn't cost anyone a thing outside of emergencies - don't borrow what you can't pay off at the end of the month.

punked · March 31, 2011

You don't understand how the system works. It's certainly not so simple as "borrowing the people's money". Anyways, banks are heavily regulated as it is. There already are strings attached - it's called competition. Credit card interest rates aren't really a problem in Canada. It seems clear to me that the kind of person that is interested in having credit card interest rates reduced is an irresponsible person who doesn't manage his or her financed properly... the kinda person that would vote for Jack Layton.

I have no debt I am an NDPer might want to check our track record on that one. I am the kind of person who thinks that if banks want my money they can have it on my terms. If they don't want my money then they can do whatever they want, but as long most of their lending dollars come from the bank of Canada then I think it is perfectly ok for us to put terms on the money we lend them to lend to us. Now having a discussion about what the terms can be is a different thing but I want to point out it isn't dumb to believe this. Once we get past the idea that the government shouldn't have a say in interest rates we can talk about what interest rates are good or not.

blueblood · March 31, 2011

I have no debt I am an NDPer might want to check our track record on that one. I am the kind of person who thinks that if banks want my money they can have it on my terms. If they don't want my money then they can do whatever they want, but as long most of their lending dollars come from the bank of Canada then I think it is perfectly ok for us to put terms on the money we lend them to lend to us. Now having a discussion about what the terms can be is a different thing but I want to point out it isn't dumb to believe this. Once we get past the idea that the government shouldn't have a say in interest rates we can talk about what interest rates are good or not.

You conveniently sidestep the bond and shareholders and the depositors. The banks have an obligation to them. No obligations met and the cashflow and liquidity by the interest rates and stability of the bank dry up and everyone loses.

The same goes for the bank of canada.

punked · March 31, 2011

You conveniently sidestep the bond and shareholders and the depositors. The banks have an obligation to them. No obligations met and the cashflow and liquidity by the interest rates and stability of the bank dry up and everyone loses.

The same goes for the bank of canada.

I don't think I side step them, they play an important role and if the bank doesn't want the peoples money and wants to increase the number of bond and shareholders and the depositors Great! This is how it use to be the banks got the money from people who invested, lent the bank money at an interest rate fixed over a number of years or people put their money in banks to get an interest rate. Awesome system nothing wrong with that and if banks wanted more investors and shareholders and the depositors they had to offer incentives like higher interest to grow their banks.

That model is gone the banks don't need to offer real interest rates to these groups anymore because they borrow money from the bank of Canada at .75%. Which isn't a bad thing it frees up credit and makes it easier to service everyone who wants credit. However with the banks borrowing peoples money should go hand in hand with the people being able to put conditions on that money. Would you agree?

blueblood · March 31, 2011

I don't think I side step them, they play an important role and if the bank doesn't want the peoples money and wants to increase the number of bond and shareholders and the depositors Great! This is how it use to be the banks got the money from people who invested, lent the bank money at an interest rate fixed over a number of years or people put their money in banks to get an interest rate. Awesome system nothing wrong with that and if banks wanted more investors and shareholders and the depositors they had to offer incentives like higher interest to grow their banks.

That model is gone the banks don't need to offer real interest rates to these groups anymore because they borrow money from the bank of Canada at .75%. Which isn't a bad thing it frees up credit and makes it easier to service everyone who wants credit. However with the banks borrowing peoples money should go hand in hand with the people being able to put conditions on that money. Would you agree?

No, and here's why. The banks borrowing from each other have billions in assets and cash. That lowers their risk as a borrower. Also, tax dollars aren't funnelled into the bank of canada, that would be political suicide.

If there's a lesson to be learned from the financial crisis this is it. You cannot force people to loan to high risk people. Credit cards are the highest risk forms of financing the banks can offer. Due to the obligations the bank has, it has to charge high rates in order to cover for people not paying their bills. Its also why retailers will beat a path to the door to have an arrangement with credit card companies because their risk of bad accounts plummets because the credit card company also takes on that risk. Another interesting thing is that for long term mortgage loans, there is a penalty for paying the mortgage off early. Why? Its the obligation to share and bond holders and some depositors. Those people receive dividends and interest payments themselves for taking the risk of investing.

Obama is trying something like this with debit card transaction fees. The banks basically told him to pound sand by implementing a maximum debit card transaction of 50 bucks. If I'm a wage earning american consumer I'd be pissed off. Bushcheney2004 will know more about this and could explain it to us canucks

punked · March 31, 2011

No, and here's why. The banks borrowing from each other have billions in assets and cash. That lowers their risk as a borrower. Also, tax dollars aren't funnelled into the bank of canada, that would be political suicide.

If there's a lesson to be learned from the financial crisis this is it. You cannot force people to loan to high risk people. Credit cards are the highest risk forms of financing the banks can offer. Due to the obligations the bank has, it has to charge high rates in order to cover for people not paying their bills. Its also why retailers will beat a path to the door to have an arrangement with credit card companies because their risk of bad accounts plummets because the credit card company also takes on that risk. Another interesting thing is that for long term mortgage loans, there is a penalty for paying the mortgage off early. Why? Its the obligation to share and bond holders and some depositors. Those people receive dividends and interest payments themselves for taking the risk of investing.

Obama is trying something like this with debit card transaction fees. The banks basically told him to pound sand by implementing a maximum debit card transaction of 50 bucks. If I'm a wage earning american consumer I'd be pissed off. Bushcheney2004 will know more about this and could explain it to us canucks

Consider the bank of Canada is a Crown Corporation and the Canadian people own it the money it lends is the Canadian peoples money.

I am not saying we force the bank to loan to anyone. I am saying if the banks borrow money from the Canadian people then the Canadian people should have a say in how that money is used.

blueblood · March 31, 2011

Consider the bank of Canada is a Crown Corporation and the Canadian people own it the money it lends is the Canadian peoples money.

I am not saying we force the bank to loan to anyone. I am saying if the banks borrow money from the Canadian people then the Canadian people should have a say in how that money is used.

Ah, but the commercial banks are also owned by people and deal with people's money. Do the shareholders set the loan rates? No, they appoint a board of directors who in turn appoint management. The BOC works the same way. Voters elect the govt, the govt appoints management at the BOC to make decisions on interest ways. Similar setups, and rightfully so, it ensures the voters/shareholders get some input while ensuring that there is competant management.

punked · March 31, 2011

Ah, but the commercial banks are also owned by people and deal with people's money. Do the shareholders set the loan rates? No, they appoint a board of directors who in turn appoint management. The BOC works the same way. Voters elect the govt, the govt appoints management at the BOC to make decisions on interest ways. Similar setups, and rightfully so, it ensures the voters/shareholders get some input while ensuring that there is competant management.

But those people are investors they enter into an agreement, "use my money and I will get a return". Taxpayers enter into no such agreement.

Moonbox · March 31, 2011

I have no debt I am an NDPer might want to check our track record on that one. I am the kind of person who thinks that if banks want my money they can have it on my terms.

Yeah...I bet. What are your terms? Do you keep your money under a mattress? LoL

but as long most of their lending dollars come from the bank of Canada then I think it is perfectly ok for us to put terms on the money we lend them to lend to us

This is where you show you have absolutely no freaking clue how the banking system works. The vast vast vast vast majority of lending dollars DO NOT come from the Bank of Canada. You really really really don't know anything about banking.

Look up what fractional reserve banking is. Maybe that will help you not embarrass yourself here.

blueblood · March 31, 2011

But those people are investors they enter into an agreement, "use my money and I will get a return". Taxpayers enter into no such agreement.

Taxpayers aren't ponying anything up and aren't taking anything out, yet they get to elect a govt that appoints management. That sounds like a good deal to me. I don't own shares of nokia, should I vote in their shareholder meetings?

Wilber · March 31, 2011

No one is saying they are making to much money, what they are however saying is "you borrow money from us at 0% interest than we will attach strings to it." If the banks want to find their own capital that is fine however if they want the governments money they have to be ready to play by the governments rules.

I will tell you right now the banks that want to grow big will borrow that government capital with very little interest or they will need to find a new model.

If you think this wrong that is fine, I think if you want to borrow the peoples money the people should have a say in the criteria for taking that money. It seems like a very fair position.

If you attach strings to what you lend them, they will attach strings to who they lend it to. Sounds fair to me, unless of course you want to write off their losses.

bloodyminded · March 31, 2011

That's what happens when I take too long to respond.... Sorry.

No, that's why I said it wasn't your fault. I too will often respond without reading through subsequent posts.

bloodyminded · March 31, 2011

Ok.

Do you have an alternative, concise, description of people who carry credit card debt?

Alternative to "stupid"?

I'm sure we could come with something. I like Capricorn's: "debtors."

There are lots of reasons people get into difficult debt, and it's more complex than mere stupidity.

Edited March 31, 2011 by bloodyminded

bloodyminded · March 31, 2011

If there's a lesson to be learned from the financial crisis this is it. You cannot force people to loan to high risk people.

This has been one of the enduring, elitist, top-down class warfare myths about the financial crisis. These poor banks and investment firms were not "forced" to do anything.

Edited March 31, 2011 by bloodyminded