In addition to saving consumers more than $20 billion, the agency (CFPB) used to send out a weekly newsletter. It was a wonderful public service, helping to educate and inform regular Americans who weren’t as business or financially savvy as modern-day America requires. I miss that newsletter.
And if the 2008 Mortgage crisis taught us anything, as well as the Well Fargo fake account scam and the relentless assault on Dodd/Frank, its that the CPB protects not just consumers, but the entire economy from an industry that never seems content to collect deposits and lend that money for 3% more than its costs.
After surgery a few years ago I hired a home health agency. One of the aides announced to me that she had gotten a pre-approved credit card application. She went on to say that it would be nice to not have to pay interest. She took the concept of "pre-approved" to mean interest-free (the offer was a time-limited-low-interest, not 0% interest). Anyhow, I spent an hour or so in credit card education. Then I had her sign onto CFPB and keep the information in case she got scammed in the future. It's people like the aide that need the CFPB the most.
And speaking of "why are they still in business?", why did the bond rating companies (S&P, Fitch...) still in business after the 2008 debacle. They were the enablers of the behavior that nearly trashed the world's economy. Their role is supposed to be "impartial third party". They somehow took that to mean "enthusiastic enabler"
Yes, Wells Fargo exists - I have a the remains of a tiny IRA account that The Financial Round Table held for my sister, deceased 2000, who worked as a Sr. Admin. back when it was Assoc. of Reserve City Bankers "trade association" aka lobbyists, in DC. The employee funds weren't invested, you couldn't take them if you became disabled/unemployed/ before 65 (we fixed that for her with a lawyer - in addition to maintaining her medical benefits) - you couldn't leave them to an heir unless it was a spouse. The funding association members were the heads of big Federal Reserve banks - annual meetings at the River Club NYC, resorts in Hawaii, Arizona, Florida.
In Trump's entire life, he broke the law, cheated, constantly lied, and attacked all American values to cruelly abuse people to get power and wealth. He hates America and if he is not able to stay in office as a dictator, he will fly to Russia to live with the oligarchs and his friend Putin. I hope America halts his escape and finally puts him in jail.
Thank you Professor K for mentioning Senator Warren's efforts to protect "We the People" from predatory lenders. Warren is the leading expert on bankruptcy in the US and the world and has long argued that no one in the US should be forced into bankruptcy due to medical bills. Payday lenders charged as much as 300% which should be criminal and they are almost aways prevalent around US military bases. The 300% figure came from a friend of mine that wrote a payday loan system for a company and the owner bragged to him about making 300% on his investment. Like Trump, they are all scum and I hope there is a special place in hell for them.
You could ask the 80% of white evangelicals who voted for Trump about their theological views on usury. Probably a large fraction of them would benefit from price controls on credit card interest rates. They would of course need enforceable price controls, not EOs, but I’m sure they will be happy to know that the orange ding dong is on their side, at least until November.
I have found that most of the evangelicals are what I call "Sunday Christians" Go church on Sunday, do the holy, holy thing then, Monday shaft you right up the ying yang.
Oh! Such an uncharitable characterization. (s/) That holy, holy thing is called the prosperity gospel wherein it's perfectly okay to shaft your friend, kin, or customer.
Shared an apartment on a dive trip with a couple who sold shit vehicles to military folks. He in particular was a jerk. What do these people see when they look in a mirror is beyond me.
Yes indeed... Senator Warren's effort saved millions and millions of dollars and solved many problems afflicting "We the People". But that's the problem. #47's pathology does not allow anyone (especially not a woman) have a successful solution to a complicated problem. In addition, as you say about his ilk, anything that makes money for someone at the expense of "We the People" has just got to be great. A very transactional President who just can't think otherwise.
Bessent was irritated when Jeanine Pirro launched the criminal investigation of Jerome Powell w/o letting Treasury know.
Mike Johnson was irritated when DDT tweeted that the credit card companies should lower interest rates to 10% on 1/20 (in honor of him becoming prez on 1/20) for a year (so Rs could retain the House in the midterms).
Will take more than 'being irritated' by these phonies. Like Schumer's strongly worded letters, Susan Collins 'concern' - use a trumpword, Fight fight fight! Against the demented nutjob you work for! Supposed to be for US, but none of you believe or DO that! If America falls, you're tone blame!
That's already been settled in a Federal Court case years ago by a court in South Dakota involving a Nebraska bank if memory serves. I can't find the case and I'm pretty fuzzy on the facts, but I doubt if Trump or Pissant could lower the interest rates.
What they could do however, is to assist consumers in setting up consolidated loans like home equity loans, etc. using the proceeds to pay off credit card debt.
That works very well for those people who own homes or other security. Of course, many institutions offer "debt consolidation loans" or similar. My credit union charges 13.5 % APR for one. That's a little bit higher than the rate on my credit cards. And they don't give me cash back on purchases. On the other hand, I just opened an offer from Wells Fargo. No interest charges for 21 months, but 24.24% after that.
I'm nearly certain you're correct that the government cannot set a limit on the interest rates the credit card companies can charge. Perhaps they can do it with legislation, but not by dictate.
So long as the Epstein files are hanging over his head, Trump will not stop throwing out all manner of nonsense to dominates the news. Some of it dangerous.
As Trump walked through the Ford plant in Dearborn Michigan, a worker repeatedly shouted at him, "pedophile protector". Trump twice angrily scrunched his mouth, yelling back, "fuck you, fuck you" followed by twice raising his right arm giving him the middle finger salute. That worker has been suspended by Ford while under investigation. Has Ross even been suspended for killing Renee Good? Is he even under investigation by the FBI? Trump also said in an interview that Renee Good was at least guilty of disrespecting the ICE agents, as if that justifies the use of deadly force by the ICE agent. As Rep. Raskin responded, by that Trump standard, the Capital police would have been justified killing scores of "protesters", whom Trump subsequently issued a blanket pardon.
‘Flipped off in public’ — Well now ICE is reminding its agents that its NOT a criminal offence to do that kind of thing:
““Immigration officers received a "legal refresher" reminding them that personal insults 🔹and rude gestures are LEGAL, per documents leaked to me: (below)
🔻“Immigration Agents Terrified of ICE backlash After SHOOTING”
- now ICE needs VOLUNTEERS from *within their ranks to go to Minnesota.
- Noem is trying to give them cover for reprehensible & illegal actions, but many Agents aren’t buying it.
The Ford worker should sue Ford &Trump for violation of his first amendment right; however, IF Ford reinstates him, he'll probably be forced to sign away his right to sue.
He can afford to give them all the royal finger salute : in one day two Go-Fund-Me’s raised him 🔻$340 K, likely more than he wd have made in a Year! 🤣 Honesty pays … someone shd tell Trump!
I agree. When I ask myself what might provoke these desperate, universally-condemned acts, the only answer I can come up with is Katie Johnson and the other Epstein survivors. Repost: Katie Johnson alleges that when she was a 13 year old child, she was tied to the 4 corners of a bed and raped, with onlookers ignoring her screams for help. I spent my career as a middle school guidance counselor. In 1994, the year this allegedly took place, the most popular Christmas gifts for 13 year old girls were Furby and Polly Pocket. Here’s her testimony. https://katemanne.substack.com/p/the-actual-conspiracy-theory-surrounding. https://katemanne.substack.com/p/they-tried-to-bury-the-katie-johnson?r=2g4u&utm_medium=ios&triedRedirect=true
That is chilling. What you're describing is not "just" rape and child abuse. it sounds like the definition of torture...and anyone in earshot is complicit.
And when they're no longer hanging over his head, he will continue to behave the exact same way.
If you're Donald Trump, you never stop throwing out all manner of nonsense to dominate the news. It's what you do. If you want to save 15% or more on car insurance... wait, sorry, wrong thread.
They all do it; he just seems to be more successful at it. Josh Hawley backed off of his rhetoric about voting to have congress approve military action in Venezuela and now Trump's threatening Greenland, etc.
When participating in Walk Out protests on January 20th one of my signs will show two large Norway rats facing each other with the words "Donald & Jeffrey" underneath.
I’m amused when leaders post their thoughts on social media believing that will turn into reality. Like boasting about companies saying they will invest in the US. Anyone remember Foxconn’s $10B investments?
Interestingly, it is OK to help people with credit card debt but not student debt…
Student debt is held by people trying to further their education. Credit card debt is held by people buying stuff they can't afford, something done disproportionately by magats, I'd imagine. Trucks and guns are expensive. And I'm sure auto companies either lobbied or cheered for the 10% camp; I don't think their own finance arms charge more than that?
Trump supporters are much more likely to have high levels of credit card debt than to have been college students. Remember that Trump "loves stupid people."
Helping CC debtors helps poorer people in general than helping SL debtors. So, if I was to choose on the basis of generally who needs it more, I would choose CC debtors.
Not that I wouldn't also help SL debtors, but in prioritizing, CC would come first.
There are a series of class-action lawsuits (Sweet v. McMahon, which was previously Sweet v. Cardona, court documents are available on Court Listener under Sweet v. Cardona) that are working their way through the federal court system right now; however, the level of reporting that is taking place (with the exception of Forbes) is minimal.
Another distraction from Epstein and Rachel Good and the crowd control tactic of “kettling.” LA times did this exposé in 2014: “Patrol agents have deliberately stepped in the path of cars apparently to justify shooting at the drivers and have fired in frustration at people throwing rocks from the Mexican side of the border, according to an independent review of 67 cases that resulted in 19 deaths.” They’ve had a dozen years to refine their tactics. https://www.latimes.com/nation/la-na-border-killings-20140227-story.html
So when Kristi Dogkiller talks about "training to weaponize cars" she is the head of the gang that practices just that? I keep coming back to these agents shooting people "in frustration", or because they are being "disrespected", or "impeded" in their thuggery. If the Capitol police had a similar lack of training and impulse control, there would have been hundreds fewer rioters for Trump to pardon....
I've seen videos of ICE facing a large number of disobedient citizens. It seems that their impulse control is greatly enhanced when they're hopelessly outnumbered. Something to strive for.
I am a customer who has no credit card debt and lots of cash and investments. Also great income. The banks favor me so I get no fee accounts and so on. I use credit card but pay off in full. The high interest rates coupled with large late penalties for someone who carries a balance is something I can only see as abuse. They do it because they can. The CFPB was meant to reduce abuses but the GOP has never let it function.
I am happy to have no fees but deplore how we sting customers at every chance.
So if he's so interested in what people pay in credit card interest rates, why did he kill the Biden attempts to regulate junk fees and "click to cancel"? Those fees cost the average citizen huge sums of money.
As research reported by the Federal Reserve Bank of New York documents, credit card companies spend vast sums on marketing. Once they have pulled customers in, they then use their market power to charge exorbitant interest rates. This arrangement is deeply unfair: The losers are vulnerable individuals and families who don’t have access to better sources of credit. It’s also wasteful, because marketing doesn’t provide useful information or make the nation richer. It’s simply a way of attracting the uninformed and credulous.
This sounds a lot like the tactics of the online gaming industry. Great post, and coda.
Why is it that only pharma ads have to recite all the ways their product can harm you? A credit card with 19% interest and $35 late fees has serious side-effects...
That's an interesting observation. But seriously? Given the venality of the current administration, the more baffling fact is that pharma ads STILL have to recite all the ways their product can harm you.
I wonder how high the interest rate and user fees have to be for it to be a viable business for the credit card companies. I recall after Hurricane Sandy that many business owners and just people managed to stay afloat through their credit cards. Loans were hard to come by, so they are serving a necessary role. I have been listening to a podcast series with Michael Lewis revisiting his book The Big Short. He talks to Matt Levine of Bloomberg News. I was surprised to learn that a lot of the high risk trading has moved from investment banks to hedge funds, high frequency traders, private equity type funds so the big banks are less profitable. What I think he said is that they can’t drive the fees and interest rates too low or they won’t be profitable. Not sure how high they have to be to be profitable.
It wouldn’t surprise me. The totals I’ve heard for some medical bills, it would be incredible if there were not many defaults. The benefits of public health insurance are many and go far beyond helping people cope with illness and injury. It creates incentives for the government to encourage healthy lifestyle choices, healthy environment, education and a professional transparent bureaucracy to manage the
tax dollars that pay for it, which reduces corruption. It’s no wonder the grifters fight it tooth and nail.
And the people most likely to be sucked in by slick marketing, whether credit cards or sports betting, tend to cluster on the MAGA side of the spectrum. Low-information, deficient education. Whether the illusion of their own affluence (buying stuff they can't afford) or the cheap adrenaline rush of betting, the impulse control deficiency is sad.
I'm astounded by the glut of ads during televised games actually promoting guys in bars or living rooms placing cellphone bets play by play. Drink some beers, get all excited about the game, and just keep pressing buttons on your phone as your money grows wings and flies away. It should simply be illegal.
The gulf states are very, very influential in our electoral politics. They're not only entwined around the Trump family, they're wrapped up with the Broligarchs too.
I think the cracks are starting to show. In my solidly Republican county we just recalled two more corrupt MAGA commissioners. That's three in one year. There are three county commissioners altogether. When DOGE went on a rampage, our local MAGA fired a bunch of county employees too. They rewarded their friends and punished their enemies.
Now the local Republican party is splintering. Many of them are now unaffiliated. It isn't a win for the Democrats, just a loss for the Republicans. There are some signs of a third party, unaffiliated starting up.
The NYT did a long article on a Washington state congresswoman from a conservative rural part of the state. She's pushing the Right to Repair and is what is needed for rural areas. The Democratic elites need to seriously look at people like this and support them. Our electoral system favors the rural.
After the Iraq war, the local Republicans quit labeling themselves as Republican. That hasn't changed yet. There are still some "dog whistles" - I never vote for any politician whose party has the word "first" in the name, for example.
I don't know about your area, but local politicians in my area don't put their party affiliation on their campaign signs or literature. I have to dig to find out who, if anyone, to vote for. Many elections here, officeholders are running unopposed or there are multiple MAGAs.
I've read a little bit about her, too, and she sounds like an opportunistic hustler like JD Vance and that (my) comment even posted in NYT. Her whole schtick is bashing the party she belongs to...if it works and she can achieve legislation, such as Right to Repair, then great. However, she seems to me to be not as authentic as she hopes to convince others she is.
I note a phrase, "the right-wing machine." That term is as good as any for what reasonable and intellectually capable persons must constantly battle. There are better ways to characterize the right wing machine than to define it. On any issue if there is a choice which is proper, evidence based, propitious for common people, sensible and smart, considerate and empathetic, the right wing machine will take the opposite. If it would be good for the environment, opposite. If it is reality based, opposite. If it is kind, the opposite. Mean and heartless, yes. Hateful and bigoted, yes. Misogynist, yes. Great for the rich, yes. Sacrifice the future for immediate gain, yes.
I guess Stephen Miller was speaking for the Republican party since at least Reagan: the strong take from the weak, always. And one of the things they LOVE to take is any protections put in place during those rare moments when Democrats control both Houses and the presidency...
I worked at a big bank in credit card analytics for a long time. I ran a report every month that reported on all of the operational costs of the card business. All of those costs are completely covered by the 3% vigorish that they charge merchants. Everything - customer support, mailing the cards out, rewards, fraud, everything. More than covered.
Their HUGE profits come from interest charges on folks who carry a balance. Reducing the interest they can charge to 10% would not put them out of business. However, their business is usury.
Ask yourself why they're willing to give you a 'signing bonus' of hundreds of $ for opening a new account. It's because there's a better than 50% probability that you will carry a balance and pump thousands of $ into their coffers.
Usury is a sin in most religions and is traditionally considered to be an interest rate over 4%-10%. Most states have laws against usury. However, to make it possible to have credit cards most states have raised the legal usury rate to 30% or higher. A simple search will tell you what your state's usury rate is.
When they say that capping interest rates would impact lower income borrowers what they mean is that they won't be offering or issuing any more credit to those borrowers, not that their businesses would become unprofitable. They would still be hugely profitable but just not huge enough. Essentially they are demanding the right, and legally they have it now, to rape and pillage through financial means.
Another thing that happened at that bank was that the senior management (C-level) gathered monthly to review complaints from the CFPB, OCC, FTC, and other regulators. Those guys hate regulation but at least at that time they took it seriously. I still advise anyone who feels ripped off by their bank to report it to the regulators. It was the one way an ordinary person could get their attention.
Finally, if you can, pay off your balance every month. If you do that the bank will actually lose money on your account.
One needs to ask, where is the competition in interest rate setting for credit cards?
If all the interest is largely profit.... one would expect some would be out there looking to take some business from the other banks by offering lower longer term rates to good borrowers.
They do not seem to bother. Credit card lending has a feel of a not very competitive industry.
Do we need a public option for this type of lending?
It's the network effect in action. Visa/Mastercard have the market locked up. They shaft merchants, who pretty much have to accept the card charges, and customers, who have to use the cards the merchants aaccept.This is obscenely profitable, which is why Apple, Google, etc. is fighting to get into the payments business.
Discover was purchased by Capital One, which is now one of the big banks the federal government contracts with for such things as IRS payments to the treasury, for example.
A public option, i.e. cards issued by a public bank would be a great solution for all of us.
I don't really know the answer to this question but my guess is that once they get the customers they want to make as much as possible off of them.
If you look closely they do compete on rewards, or by partnering with airlines and hotels, sometimes on interest rates. Small banks offer somewhat better deals but usually not the big signing bonuses. Most of the business goes to the big banks who can afford to offer cash for signing up.
On the one hand you say that ALL their costs are covered by the 3% merchant fees, but then you say they lose money on pay-in-full accounts. Can you clear up that seeming contradiction?
It IS true that mandating lower interest charges would cause card issuers to reduce availability of credit to the highest risks, because they DO lose money on uncollectible accounts.
It's all murky as hell, which is why we need a functioning CFPB.
It's frustrating to imagine what a blow to the economy it would be if people only bought items they need and can afford to pay for. But it would be great if we could slowly transition in that direction.
Yes that is a bit of a contradiction. I had access to all of the operational costs but I didn't know the actual revenue from merchant fees. My assessment is based on some assumptions about those revenues from the total volume of transactions.
The statement that they lose money if you pay off your bill every month was something that I heard, not my own analysis. I guess I shouldn't have mixed them.
You should still pay off your bill every month but I'm not actually sure if they lose money on you if you do. Certainly, they may never recover the marketing expense which includes not only the cost of advertising but also the signing bonuses they pay out. And certainly they spend tremendous amounts on acquiring new customers. That money is not covered by merchant fees.
Why would a bank lose money on credit card account with balance fully paid every month? You’ve said that operational expenses are paid for by merchant fees?
BTW, I agree that paying credit card balance every month is the best solution. The second one is to not have a credit card. … and I do realize that neither “solution” works for everyone :-(.
See my response to George Hicks above. I'm not sure that they do lose money if you don't count marketing expenses. However, if they give you $500 - $1,000 to open the account and never earn any interest income from you, they may never make that initial expense (+ the expense of advertising) back. Those kinds of bonuses are not unheard of for 'high-end' cards. It's also interesting that they charge the merchants more when someone uses one of those high-end cards - i.e. the merchant fees are higher if you use a 'Gold' or 'Platinum' or 'Black' or whatever card, often over 5%.
Krugman’s right on the surface diagnosis. Trump doesn’t have an economic philosophy. He doesn’t even have a corrupted one. What he has is a reflex. Reward allies. Punish resistance. Perform strength. Move on.
But I keep thinking the most dangerous part of that diagnosis isn’t economic at all.
It’s civic.
In earlier eras, even bad faith policy lived inside a story about the public good. Supply-side economics claimed to lift all boats. Deregulation claimed efficiency. Hypocrisy still gestured toward norms, even while violating them. That gesture mattered. It meant there was still something left to argue with, something to expose as false.
What Krugman is describing now is thinner and more corrosive than hypocrisy.
It’s emptiness.
When policy becomes transactional rather than ideological, it stops being about outcomes and starts being about compliance. Cutting taxes for the wealthy isn’t meant to grow the economy. It’s a reward. Rolling back environmental protections isn’t about markets. It’s a signal to donors and allies. A credit card interest cap isn’t consumer protection. It’s theater, timed for the midterms.
None of this is meant to work. It’s meant to be seen.
That’s the shift that unsettles me. When governance stops explaining itself, it starts testing itself. Each move becomes a probe. Will anyone stop this. Will institutions push back. Will the system obey if I simply announce something and dare it to resist.
Krugman notes that Trump governs by pronouncement. That line sticks with me. Pronouncements aren’t laws. They’re loyalty tests. They skip deliberation and dare the system to correct them. If the system doesn’t, the next pronouncement comes easier, and the ground shifts a little more.
That’s how republics hollow out. Not with a single rupture, but with repeated moments where law is treated as optional and spectacle stands in for process.
The credit card cap is revealing precisely because, stripped of policy debate, it asks a basic question. Does authority come from law or from declaration. From Congress or from the man who speaks the loudest.
Trump doesn’t care which answer wins, as long as it’s his.
Krugman’s comparison to Nixon is useful because it shows the break. Nixon abused power, but he still operated inside structures. He pressured institutions, but he acknowledged they existed. He sought legislation. He worked the machinery. Trump doesn’t bother. He posts. He announces. He waits to see who flinches.
That difference matters. Abuse inside a system is one thing. Indifference to the system itself is another.
Here’s where I think Democrats and the press sometimes miss the deeper danger. When Trump floats policies like this, the risk isn’t whether they pass. It’s whether we respond as if policy has already happened. Whether we debate merits instead of legality. Whether we treat declarations as governance simply because they’re loud and constant.
Krugman’s right to warn Democrats not to assist another charade. But the refusal has to run deeper than strategy. It has to be cultural. We can’t normalize rule by announcement. We can’t let dominance theater replace law just because it occasionally gestures toward a popular outcome.
There is a serious case for reining in abusive credit card practices. Krugman makes it well. Elizabeth Warren built an agency to do exactly that work. Trump tried to shut it down. That tells you everything you need to know. He doesn’t want protection. He wants applause.
So the question I keep returning to isn’t whether Trump believes in supply-side economics. He clearly doesn’t.
It’s whether a republic can survive once democracy is no longer even rhetorically useful. When leaders stop pretending they govern for the public good and start governing to see who will stop them.
That isn’t an economic question.
It’s a civic one.
And it’s the question we should keep asking, calmly and without distraction, every time a pronouncement replaces a law and spectacle asks us to forget how authority is supposed to work.
With affordability becoming harder and harder one wonders if personal debit and the distress it causes will become the motivating force for change.
Above all of the “things happening to other people” does the personal financial plight become the double edged sword for the election. Basically the same force that swept Trump back into power.
Conversely, is being an ICE Agent (hired goon) the only high paying job with (very limited availability) to a young person with a minimal skill set? How long before being an ICE Agent leads to the abuses and extortion so typical of gangs as seen in third world countries?
I read on The Bulwark that Democrats (meaning Schumer) have ‘no appetite’ for shutting down the government over ICE funding. Hard to imagine that they will stand up for anything like consumer protections, although Trump would certainly love a photo op with Senator Warren. (Did he call her Pocahontas?)
If not now, when? If murdering citizens with impunity isn’t a reason to shut down the murderers, then what is?
I can’t express my rage at Democrat “leaders” who are merely asking for “restraints” on ICE murderers. What makes the Democrats think ICE will comply with their “restraints”? Did this administration comply with the recently passed law requiring them to release the Epstein files?
Our Democrat “leaders” don’t seem capable of learning. Murdering Americans requires a heavy and swift hammer. Where the eff is it?
We had a big "No Kings, No War, No ICE" march in NYC on Sunday, and once again Hak and Chuck were AWOL. Protesters are starting to carry pictures of these Vichy Dems. Hak just voted to condemn "socialism" though Mamdani won his district and 25% of the NYC electorate call themselves democratic socialists. Hak declined to attend the mayoral inaugural. Chuck refused to endorse Mamdani, showed up to the inaugural but for once avoided all microphones and was invisible.
A shutdown brings attention to an issue. That's why the shutdown about the affordable care act made sense. ICE is getting plenty of attention with their thuggish behavior. You don't want to take away their rope while they're hanging themselves.
Around here, the ones starving were the people who depend on food banks and food stamps. You can't starve a beast that feeds from the U.S. Treasury trough.
We can’t expect Minnesota residents to die needlessly while we wait for enough people (how many?) to be outraged. The polls already have Trump underwater on his handling of immigration. Enough is enough.
… but they are also harassing and eventually shooting people along the way. They may harm too many people before they “hang themself”… they need to be stopped.
Smart consumers pay the balance of their accounts every month and pay no interest at all and some even get cash back. I do. So there ought to be a way to do this for more people. But I have no idea how it can be done. Any ideas?
The problem is that too many people are in dire straits, such that they can't afford the basic cost of living. So, they put essentials like food and clothing on credit cards, they get behind in their payments, and end up paying huge amounts of interest. Sometimes, they choose the alternative of payday lenders, which is even worse. Paying workers a living wage would help.
There is some truth to that, but a lot of people see credit as cash in their pocket. I think a bigger predictor of whether you use credit is how your family uses credit. My parents always paid off their credit cards every month and so do I. When I was suddenly single and poor, I didn't have a credit card because if I couldn't pay for it then, I wouldn't be able to pay for it later. I've been very vocal with my kids to avoid credit cards and so far, most of them have.
You can go overboard, but personal responsibility is important too.
I agree. I always pay off my credit card bill in full, as did my parents. I told my son when he got his first credit card that it is a convenience, not a substitute for money. I instructed him not to charge anything he didn't have the cash in hand to pay for. But some people are desperate. I forgot to add medical bills to the list of expenses that cause people to end up with high credit card balances. Long before she became a senator, Elizabeth Warren, along with others, did research in which they found that the major cause of bankruptcy was not people maxing out credit cards on extravagances, but medical debt. We need to fix our broken healthcare system.
YES, Ms Herz! A living wage starts at $25 an hour and rises to $40. Reich is right. Try multiplying $15 an hour and see if you can eat healthy food (giving up a roof over your head, of course and any medical attention).
Retailers pay a percentage to credit card companies on every purchase that the card is used for. I don’t like carrying a bunch of cash, but I make all my small purchases with cash, the bonus is that I’m not tracked every time I buy a pair of socks or a cup of coffee. My automotive mechanic gives a discount of the amount for paying in cash now. Hope more businesses will do the same.
Despite the fact that I use an cc for most things, it really angers me when places don’t have the option for cash or cc. Many places are going cash free. I’ve seen it at amusement parks, food halls, and a handful of other spots. They usually have a machine that will put cash onto a card. In theory, ok, but what happens at the end of the day when you have money left on that card? I haven’t looked that closely, but my assumption is that it’s basically locked onto that card, like a gift card. If a place is going to force a consumer to use that, they should have to refund the reverse at the end of the visit. Given that it’s a machine, I highly doubt that’s possible.
I have also seen the opposite, as you mention with the mechanic, usually small, hyper local businesses that encourage cash or check. They often pass a cc fee onto the customer. This one I have more mixed feelings. On one hand, it is a legitimate cost to them, one that is difficult to absorb and fair to pass on. At the same time, for some people, that is the only way they may be able to “afford” something like a car repair in an emergency. This is a perfect example that really shows who benefits and who doesn’t from credit cards. Small businesses and low income households are on the losing side while those with more money and the cc companies benefit.
I get a bit of a thrill from walking out of a business that won’t accept cash. There’s a place for credit cards like emergencies, as you pointed out. I don’t want to destroy that business, but it’s become predatory. I don’t want it to destroy us.
It does seem like it is an extra tax you put on yourself, and if it’s already added into the cost of everything then even people who pay cash are still paying into that system, adding to the burden for lower income households where even one or two percent on everything they buy is another stressor.
Just for the record, there are an awful lot of liberal politicians and do-gooders (e.g. ASPCA, Doctors without Borders, your alma mater) that don't directly charge you extra for credit-card fees, but do invite you to tax yourself an extra one or two percent as part of the transaction.
Not deceptive or exploitative, but I find it annoying just the same.
This doesn’t bother me since, at least in my experience, it has been optional. You can pay it to help them offset the fee, or not pay it and they eat the fee. We even give the option at very small levels where I’m involved, a school PTA (Title 1, so not raking it in) and a high school booster club (not title but still small budget). But it should be optional, only the fee amount, and clearly marked. Teri’s point is also valid. A lot of places are just marking up prices across the board and passing the cost on to everyone, burdening lower, middle, and fixed income the most.
It's not the non profits but the e-commerce platform that suggests users can pay the fee for using it. If the platform covers the fee, they're making a financial donation as well, it seems.
I’m not sure about larger places that integrate something into their own website, or whatever, but for us, again on a very small scale, we have always had the option from the platform (ie Square or a fundraising website) whether or not to include it. I appreciate the option…and that it is still an option even if you opt to include the option. 😉
Many businesses in this area charge an extra fee if you use a credit card for purchases. The gas stations began the practice and it spread during the pandemic. I recall many people being outraged and claiming they would never return to their favorite restaurant because it had begun these extra fees on credit cards. I guess they're only eating at Wendy's now.
Many people are woefully uneducated about credit cards. I recently found out that a friend did not know one can pay more than the minimum credit card payment. A 40-something adult with a college degree thought that was what all he was *allowed* to pay every month. It sounds ludicrous, but it tracks with many stories we hear whether it’s predatory loans, risky investments, etc. I would bet the vast majority of Americans, especially those from lower income households which this person is, do not have financial literacy. Some high schools now require it, but it should be a requirement for every school across the country.
Parents can teach the same. Our kids kept a tally of their allowance/gift income and purchases. It helped them learn to control impulse spending before they were in grade school, and helped with math.
Parents can teach financial literacy if they have it themselves, have the time, and if they see it as necessary. When I asked my dad to show me how to balance my checkbook (way back when) his answer was that when I got married, my husband would do that for me.
Teri is spot on. In this person’s particular case, he came from a family history of low income. That doesn’t inherently mean there isn’t financial literacy, but it often does and/or still looks different than for a person of more means. And other factors that may contribute to that, such as being black in the South in America, can mean that there has not been much if any opportunity to gain such an education.
Education. The HHS Department used to issue guidelines and suggestions to staying healthy. Why can't the government encourage people to save and spend intelligently with budgetary programs that reward users to pay off their debts rather than accumulate more. There is nothing illegal in the government advocating for its citizens.
That's a good idea, however, it would counter the interests of the "masters of the universe". Maybe this is something that can be done when we get the ship called the US rebalanced.
Yes. First of all, pay people a living wage. Second, we need a cultural shift away from materialism. Social media, especially short form video, is literally destroying human capacity for patience and contentment. Everyone wants this and that because they think everyone else already has it. And if they can't afford it, they just get it on credit.
I assume one reason people credit balances and pay the exorbitant rates is we do not provide basic financial literacy education to people. There is simply no valid reason to carry credit card debt. Their fees are also a burden on small business as we see some, particularly resturants, have started to add back those fees. For that reason I have started paying Resturant bills with cash. Benefits both me and the business.
US schools struggle to teach basic literacy, much less financial literacy. One must also assume that the lack of requirements for financial literacy classes is basically a conspiracy to keep people ignorant. The average person may not use algebra, which is a required course. But they most surely will need to understand compound interest.
Gary, One idea is Congress pass legislation that two people working full time should be paid enough wages that they can support a family which means being able to purchase a small house and provide essentials for their family. This insane K economy in which 10% are doing 48% of spending while families go hungry is not democracy. It is oligarchic capitalism. Soon we’ll be like Russia with the 90% barely surviving. Somehow, “we the people” must change the system. I understand this legislation would need to be done in small increments. We have to find a way to get out of this system.
In addition to saving consumers more than $20 billion, the agency (CFPB) used to send out a weekly newsletter. It was a wonderful public service, helping to educate and inform regular Americans who weren’t as business or financially savvy as modern-day America requires. I miss that newsletter.
And if the 2008 Mortgage crisis taught us anything, as well as the Well Fargo fake account scam and the relentless assault on Dodd/Frank, its that the CPB protects not just consumers, but the entire economy from an industry that never seems content to collect deposits and lend that money for 3% more than its costs.
After surgery a few years ago I hired a home health agency. One of the aides announced to me that she had gotten a pre-approved credit card application. She went on to say that it would be nice to not have to pay interest. She took the concept of "pre-approved" to mean interest-free (the offer was a time-limited-low-interest, not 0% interest). Anyhow, I spent an hour or so in credit card education. Then I had her sign onto CFPB and keep the information in case she got scammed in the future. It's people like the aide that need the CFPB the most.
Speaking of Wells Fargo, why are they even in business after the fake account scandal?
And speaking of "why are they still in business?", why did the bond rating companies (S&P, Fitch...) still in business after the 2008 debacle. They were the enablers of the behavior that nearly trashed the world's economy. Their role is supposed to be "impartial third party". They somehow took that to mean "enthusiastic enabler"
Yes, Wells Fargo exists - I have a the remains of a tiny IRA account that The Financial Round Table held for my sister, deceased 2000, who worked as a Sr. Admin. back when it was Assoc. of Reserve City Bankers "trade association" aka lobbyists, in DC. The employee funds weren't invested, you couldn't take them if you became disabled/unemployed/ before 65 (we fixed that for her with a lawyer - in addition to maintaining her medical benefits) - you couldn't leave them to an heir unless it was a spouse. The funding association members were the heads of big Federal Reserve banks - annual meetings at the River Club NYC, resorts in Hawaii, Arizona, Florida.
David,
In Trump's entire life, he broke the law, cheated, constantly lied, and attacked all American values to cruelly abuse people to get power and wealth. He hates America and if he is not able to stay in office as a dictator, he will fly to Russia to live with the oligarchs and his friend Putin. I hope America halts his escape and finally puts him in jail.
Wonder how long it would take before Putin tires of Donny and has him thrown out a window. Not long I suppose.
Five minutes. Max.
Thank you Professor K for mentioning Senator Warren's efforts to protect "We the People" from predatory lenders. Warren is the leading expert on bankruptcy in the US and the world and has long argued that no one in the US should be forced into bankruptcy due to medical bills. Payday lenders charged as much as 300% which should be criminal and they are almost aways prevalent around US military bases. The 300% figure came from a friend of mine that wrote a payday loan system for a company and the owner bragged to him about making 300% on his investment. Like Trump, they are all scum and I hope there is a special place in hell for them.
The church long held that usury is a sin. I don't know if that's changed.
You could ask the 80% of white evangelicals who voted for Trump about their theological views on usury. Probably a large fraction of them would benefit from price controls on credit card interest rates. They would of course need enforceable price controls, not EOs, but I’m sure they will be happy to know that the orange ding dong is on their side, at least until November.
I have found that most of the evangelicals are what I call "Sunday Christians" Go church on Sunday, do the holy, holy thing then, Monday shaft you right up the ying yang.
Oh! Such an uncharitable characterization. (s/) That holy, holy thing is called the prosperity gospel wherein it's perfectly okay to shaft your friend, kin, or customer.
Shared an apartment on a dive trip with a couple who sold shit vehicles to military folks. He in particular was a jerk. What do these people see when they look in a mirror is beyond me.
Yes indeed... Senator Warren's effort saved millions and millions of dollars and solved many problems afflicting "We the People". But that's the problem. #47's pathology does not allow anyone (especially not a woman) have a successful solution to a complicated problem. In addition, as you say about his ilk, anything that makes money for someone at the expense of "We the People" has just got to be great. A very transactional President who just can't think otherwise.
Bessent was irritated when Jeanine Pirro launched the criminal investigation of Jerome Powell w/o letting Treasury know.
Mike Johnson was irritated when DDT tweeted that the credit card companies should lower interest rates to 10% on 1/20 (in honor of him becoming prez on 1/20) for a year (so Rs could retain the House in the midterms).
Will take more than 'being irritated' by these phonies. Like Schumer's strongly worded letters, Susan Collins 'concern' - use a trumpword, Fight fight fight! Against the demented nutjob you work for! Supposed to be for US, but none of you believe or DO that! If America falls, you're tone blame!
Off topic but I loved the musical coda! Thank you Prof. Krugman.
...especially the guy with the sticks (claves)
That's already been settled in a Federal Court case years ago by a court in South Dakota involving a Nebraska bank if memory serves. I can't find the case and I'm pretty fuzzy on the facts, but I doubt if Trump or Pissant could lower the interest rates.
What they could do however, is to assist consumers in setting up consolidated loans like home equity loans, etc. using the proceeds to pay off credit card debt.
That works very well for those people who own homes or other security. Of course, many institutions offer "debt consolidation loans" or similar. My credit union charges 13.5 % APR for one. That's a little bit higher than the rate on my credit cards. And they don't give me cash back on purchases. On the other hand, I just opened an offer from Wells Fargo. No interest charges for 21 months, but 24.24% after that.
I'm nearly certain you're correct that the government cannot set a limit on the interest rates the credit card companies can charge. Perhaps they can do it with legislation, but not by dictate.
If irritation leads to endless and painful scratching, I'm all for it.
So long as the Epstein files are hanging over his head, Trump will not stop throwing out all manner of nonsense to dominates the news. Some of it dangerous.
As Trump walked through the Ford plant in Dearborn Michigan, a worker repeatedly shouted at him, "pedophile protector". Trump twice angrily scrunched his mouth, yelling back, "fuck you, fuck you" followed by twice raising his right arm giving him the middle finger salute. That worker has been suspended by Ford while under investigation. Has Ross even been suspended for killing Renee Good? Is he even under investigation by the FBI? Trump also said in an interview that Renee Good was at least guilty of disrespecting the ICE agents, as if that justifies the use of deadly force by the ICE agent. As Rep. Raskin responded, by that Trump standard, the Capital police would have been justified killing scores of "protesters", whom Trump subsequently issued a blanket pardon.
‘Flipped off in public’ — Well now ICE is reminding its agents that its NOT a criminal offence to do that kind of thing:
““Immigration officers received a "legal refresher" reminding them that personal insults 🔹and rude gestures are LEGAL, per documents leaked to me: (below)
🔻“Immigration Agents Terrified of ICE backlash After SHOOTING”
- now ICE needs VOLUNTEERS from *within their ranks to go to Minnesota.
- Noem is trying to give them cover for reprehensible & illegal actions, but many Agents aren’t buying it.
https://www.kenklippenstein.com/p/immigration-agents-terrified-by-ice
The Ford worker should sue Ford &Trump for violation of his first amendment right; however, IF Ford reinstates him, he'll probably be forced to sign away his right to sue.
He can afford to give them all the royal finger salute : in one day two Go-Fund-Me’s raised him 🔻$340 K, likely more than he wd have made in a Year! 🤣 Honesty pays … someone shd tell Trump!
and LEOs are taken off-duty until the shooting investigation exonerates them
Yea, but ICE isn't law enforcement. They are Gestapo.
Trump supporters can kick ass -
Domestic Terrorists are anyone that doesn’t support the Orange Maniac
and they get what they deserve.
I agree. When I ask myself what might provoke these desperate, universally-condemned acts, the only answer I can come up with is Katie Johnson and the other Epstein survivors. Repost: Katie Johnson alleges that when she was a 13 year old child, she was tied to the 4 corners of a bed and raped, with onlookers ignoring her screams for help. I spent my career as a middle school guidance counselor. In 1994, the year this allegedly took place, the most popular Christmas gifts for 13 year old girls were Furby and Polly Pocket. Here’s her testimony. https://katemanne.substack.com/p/the-actual-conspiracy-theory-surrounding. https://katemanne.substack.com/p/they-tried-to-bury-the-katie-johnson?r=2g4u&utm_medium=ios&triedRedirect=true
That is chilling. What you're describing is not "just" rape and child abuse. it sounds like the definition of torture...and anyone in earshot is complicit.
It would be great if you can share Kate Manne’s links. Every adult in this country should read Katie Johnsons’s testimony, imho.
Here it is: https://cdn.factcheck.org/UploadedFiles/Johnson_TrumpEpstein_Lawsuit.pdf
Thank you for posting this! I hope every adult in the US reads it.
And when they're no longer hanging over his head, he will continue to behave the exact same way.
If you're Donald Trump, you never stop throwing out all manner of nonsense to dominate the news. It's what you do. If you want to save 15% or more on car insurance... wait, sorry, wrong thread.
Exactly. His 10% "pronouncement" was so paper thin as to be nothing but (lame) lip service.
Watch what I do, not what I say...
They all do it; he just seems to be more successful at it. Josh Hawley backed off of his rhetoric about voting to have congress approve military action in Venezuela and now Trump's threatening Greenland, etc.
When participating in Walk Out protests on January 20th one of my signs will show two large Norway rats facing each other with the words "Donald & Jeffrey" underneath.
There are a lot of files to shred so just be patient; those shreded files will be used as confetti at the next R win of the WH
I thought Trump was doing this before 2016, before the Epstein files became an issue. Or am I missing something ?
I’m amused when leaders post their thoughts on social media believing that will turn into reality. Like boasting about companies saying they will invest in the US. Anyone remember Foxconn’s $10B investments?
Interestingly, it is OK to help people with credit card debt but not student debt…
Student debt is held by people trying to further their education. Credit card debt is held by people buying stuff they can't afford, something done disproportionately by magats, I'd imagine. Trucks and guns are expensive. And I'm sure auto companies either lobbied or cheered for the 10% camp; I don't think their own finance arms charge more than that?
Trump supporters are much more likely to have high levels of credit card debt than to have been college students. Remember that Trump "loves stupid people."
Well, to be fair, it's not like he'll "actually" help anyone with their credit card debt....
Helping CC debtors helps poorer people in general than helping SL debtors. So, if I was to choose on the basis of generally who needs it more, I would choose CC debtors.
Not that I wouldn't also help SL debtors, but in prioritizing, CC would come first.
He tried. A lot of that action stalled out in implementation. I would love (love!) for the NYT to report on this, but nah......
The courts blocked a lot of his administration's efforts.
Ditto Obama’s presidency — hugely frustrating.
There are a series of class-action lawsuits (Sweet v. McMahon, which was previously Sweet v. Cardona, court documents are available on Court Listener under Sweet v. Cardona) that are working their way through the federal court system right now; however, the level of reporting that is taking place (with the exception of Forbes) is minimal.
Another distraction from Epstein and Rachel Good and the crowd control tactic of “kettling.” LA times did this exposé in 2014: “Patrol agents have deliberately stepped in the path of cars apparently to justify shooting at the drivers and have fired in frustration at people throwing rocks from the Mexican side of the border, according to an independent review of 67 cases that resulted in 19 deaths.” They’ve had a dozen years to refine their tactics. https://www.latimes.com/nation/la-na-border-killings-20140227-story.html
So when Kristi Dogkiller talks about "training to weaponize cars" she is the head of the gang that practices just that? I keep coming back to these agents shooting people "in frustration", or because they are being "disrespected", or "impeded" in their thuggery. If the Capitol police had a similar lack of training and impulse control, there would have been hundreds fewer rioters for Trump to pardon....
I've seen videos of ICE facing a large number of disobedient citizens. It seems that their impulse control is greatly enhanced when they're hopelessly outnumbered. Something to strive for.
P.S.: Shouldn't that be "Kristi Puppykiller"?
It’s like we’ve walked through the Looking Glass and “logic is reversed.”
Patrol agents routinely murdered Mexicans while Obama was POTUS?
This almost sounds as if LEO depravity doesn't even require a Republican in the White House.
It's a very old story. LEO abuses have been well documented for centuries.
I am a customer who has no credit card debt and lots of cash and investments. Also great income. The banks favor me so I get no fee accounts and so on. I use credit card but pay off in full. The high interest rates coupled with large late penalties for someone who carries a balance is something I can only see as abuse. They do it because they can. The CFPB was meant to reduce abuses but the GOP has never let it function.
I am happy to have no fees but deplore how we sting customers at every chance.
So if he's so interested in what people pay in credit card interest rates, why did he kill the Biden attempts to regulate junk fees and "click to cancel"? Those fees cost the average citizen huge sums of money.
Because he can't allow a Democrat to accomplish anything popular.
As research reported by the Federal Reserve Bank of New York documents, credit card companies spend vast sums on marketing. Once they have pulled customers in, they then use their market power to charge exorbitant interest rates. This arrangement is deeply unfair: The losers are vulnerable individuals and families who don’t have access to better sources of credit. It’s also wasteful, because marketing doesn’t provide useful information or make the nation richer. It’s simply a way of attracting the uninformed and credulous.
This sounds a lot like the tactics of the online gaming industry. Great post, and coda.
Why is it that only pharma ads have to recite all the ways their product can harm you? A credit card with 19% interest and $35 late fees has serious side-effects...
That's an interesting observation. But seriously? Given the venality of the current administration, the more baffling fact is that pharma ads STILL have to recite all the ways their product can harm you.
Give RFK another year.
There used to be usuary laws that prohibited charging over about 15% on any loans. what happened to them?
I wonder how high the interest rate and user fees have to be for it to be a viable business for the credit card companies. I recall after Hurricane Sandy that many business owners and just people managed to stay afloat through their credit cards. Loans were hard to come by, so they are serving a necessary role. I have been listening to a podcast series with Michael Lewis revisiting his book The Big Short. He talks to Matt Levine of Bloomberg News. I was surprised to learn that a lot of the high risk trading has moved from investment banks to hedge funds, high frequency traders, private equity type funds so the big banks are less profitable. What I think he said is that they can’t drive the fees and interest rates too low or they won’t be profitable. Not sure how high they have to be to be profitable.
I wonder whether the US health system makes private lending much riskier in the US.
It wouldn’t surprise me. The totals I’ve heard for some medical bills, it would be incredible if there were not many defaults. The benefits of public health insurance are many and go far beyond helping people cope with illness and injury. It creates incentives for the government to encourage healthy lifestyle choices, healthy environment, education and a professional transparent bureaucracy to manage the
tax dollars that pay for it, which reduces corruption. It’s no wonder the grifters fight it tooth and nail.
The Overton Window
And the people most likely to be sucked in by slick marketing, whether credit cards or sports betting, tend to cluster on the MAGA side of the spectrum. Low-information, deficient education. Whether the illusion of their own affluence (buying stuff they can't afford) or the cheap adrenaline rush of betting, the impulse control deficiency is sad.
I'm astounded by the glut of ads during televised games actually promoting guys in bars or living rooms placing cellphone bets play by play. Drink some beers, get all excited about the game, and just keep pressing buttons on your phone as your money grows wings and flies away. It should simply be illegal.
And speaking of Trump's purely transactional economic "policy," the recent deal on a Saudi golf course development announced by Eric Trump, will put billions directly into his pocket , a clear payback for the political favors he granted to MBS. https://open.substack.com/pub/popularinformation/p/update-the-saudi-payback?r=3liwb&utm_medium=ios&shareImageVariant=overlay
The gulf states are very, very influential in our electoral politics. They're not only entwined around the Trump family, they're wrapped up with the Broligarchs too.
Whichever administration is in power, they must be able to influence how much oil the gulf States pump at any given time.
Excellent column, deeply informed and right to the point. More like this!
He's using every possible power to make his authority seem inevitable. Like a growing virus. That's the ONLY thing he's doing.
I think the cracks are starting to show. In my solidly Republican county we just recalled two more corrupt MAGA commissioners. That's three in one year. There are three county commissioners altogether. When DOGE went on a rampage, our local MAGA fired a bunch of county employees too. They rewarded their friends and punished their enemies.
Now the local Republican party is splintering. Many of them are now unaffiliated. It isn't a win for the Democrats, just a loss for the Republicans. There are some signs of a third party, unaffiliated starting up.
The NYT did a long article on a Washington state congresswoman from a conservative rural part of the state. She's pushing the Right to Repair and is what is needed for rural areas. The Democratic elites need to seriously look at people like this and support them. Our electoral system favors the rural.
After the Iraq war, the local Republicans quit labeling themselves as Republican. That hasn't changed yet. There are still some "dog whistles" - I never vote for any politician whose party has the word "first" in the name, for example.
I don't know about your area, but local politicians in my area don't put their party affiliation on their campaign signs or literature. I have to dig to find out who, if anyone, to vote for. Many elections here, officeholders are running unopposed or there are multiple MAGAs.
I've read a little bit about her, too, and she sounds like an opportunistic hustler like JD Vance and that (my) comment even posted in NYT. Her whole schtick is bashing the party she belongs to...if it works and she can achieve legislation, such as Right to Repair, then great. However, she seems to me to be not as authentic as she hopes to convince others she is.
I note a phrase, "the right-wing machine." That term is as good as any for what reasonable and intellectually capable persons must constantly battle. There are better ways to characterize the right wing machine than to define it. On any issue if there is a choice which is proper, evidence based, propitious for common people, sensible and smart, considerate and empathetic, the right wing machine will take the opposite. If it would be good for the environment, opposite. If it is reality based, opposite. If it is kind, the opposite. Mean and heartless, yes. Hateful and bigoted, yes. Misogynist, yes. Great for the rich, yes. Sacrifice the future for immediate gain, yes.
I guess Stephen Miller was speaking for the Republican party since at least Reagan: the strong take from the weak, always. And one of the things they LOVE to take is any protections put in place during those rare moments when Democrats control both Houses and the presidency...
I worked at a big bank in credit card analytics for a long time. I ran a report every month that reported on all of the operational costs of the card business. All of those costs are completely covered by the 3% vigorish that they charge merchants. Everything - customer support, mailing the cards out, rewards, fraud, everything. More than covered.
Their HUGE profits come from interest charges on folks who carry a balance. Reducing the interest they can charge to 10% would not put them out of business. However, their business is usury.
Ask yourself why they're willing to give you a 'signing bonus' of hundreds of $ for opening a new account. It's because there's a better than 50% probability that you will carry a balance and pump thousands of $ into their coffers.
Usury is a sin in most religions and is traditionally considered to be an interest rate over 4%-10%. Most states have laws against usury. However, to make it possible to have credit cards most states have raised the legal usury rate to 30% or higher. A simple search will tell you what your state's usury rate is.
When they say that capping interest rates would impact lower income borrowers what they mean is that they won't be offering or issuing any more credit to those borrowers, not that their businesses would become unprofitable. They would still be hugely profitable but just not huge enough. Essentially they are demanding the right, and legally they have it now, to rape and pillage through financial means.
Another thing that happened at that bank was that the senior management (C-level) gathered monthly to review complaints from the CFPB, OCC, FTC, and other regulators. Those guys hate regulation but at least at that time they took it seriously. I still advise anyone who feels ripped off by their bank to report it to the regulators. It was the one way an ordinary person could get their attention.
Finally, if you can, pay off your balance every month. If you do that the bank will actually lose money on your account.
One needs to ask, where is the competition in interest rate setting for credit cards?
If all the interest is largely profit.... one would expect some would be out there looking to take some business from the other banks by offering lower longer term rates to good borrowers.
They do not seem to bother. Credit card lending has a feel of a not very competitive industry.
Do we need a public option for this type of lending?
It's the network effect in action. Visa/Mastercard have the market locked up. They shaft merchants, who pretty much have to accept the card charges, and customers, who have to use the cards the merchants aaccept.This is obscenely profitable, which is why Apple, Google, etc. is fighting to get into the payments business.
So....some intervention of some nature may be warranted, but needs to be done my smart people who can project consequences.
It's a good question. What stops a new card from charging lower interest costs while also excluding high-risk consumers?
Nothing but greed.
They could make MORE money doing that, by avoiding high-risk defaulting-customer costs. Lower risk consumers would flock to the slightly lower rate.
Yes. American Express and Discover have their own networks but the outcome is the same.
Discover was purchased by Capital One, which is now one of the big banks the federal government contracts with for such things as IRS payments to the treasury, for example.
A public option, i.e. cards issued by a public bank would be a great solution for all of us.
I don't really know the answer to this question but my guess is that once they get the customers they want to make as much as possible off of them.
If you look closely they do compete on rewards, or by partnering with airlines and hotels, sometimes on interest rates. Small banks offer somewhat better deals but usually not the big signing bonuses. Most of the business goes to the big banks who can afford to offer cash for signing up.
I think the term enshittification applies.
On the one hand you say that ALL their costs are covered by the 3% merchant fees, but then you say they lose money on pay-in-full accounts. Can you clear up that seeming contradiction?
It IS true that mandating lower interest charges would cause card issuers to reduce availability of credit to the highest risks, because they DO lose money on uncollectible accounts.
It's all murky as hell, which is why we need a functioning CFPB.
It's frustrating to imagine what a blow to the economy it would be if people only bought items they need and can afford to pay for. But it would be great if we could slowly transition in that direction.
Yes that is a bit of a contradiction. I had access to all of the operational costs but I didn't know the actual revenue from merchant fees. My assessment is based on some assumptions about those revenues from the total volume of transactions.
The statement that they lose money if you pay off your bill every month was something that I heard, not my own analysis. I guess I shouldn't have mixed them.
You should still pay off your bill every month but I'm not actually sure if they lose money on you if you do. Certainly, they may never recover the marketing expense which includes not only the cost of advertising but also the signing bonuses they pay out. And certainly they spend tremendous amounts on acquiring new customers. That money is not covered by merchant fees.
Why would a bank lose money on credit card account with balance fully paid every month? You’ve said that operational expenses are paid for by merchant fees?
BTW, I agree that paying credit card balance every month is the best solution. The second one is to not have a credit card. … and I do realize that neither “solution” works for everyone :-(.
See my response to George Hicks above. I'm not sure that they do lose money if you don't count marketing expenses. However, if they give you $500 - $1,000 to open the account and never earn any interest income from you, they may never make that initial expense (+ the expense of advertising) back. Those kinds of bonuses are not unheard of for 'high-end' cards. It's also interesting that they charge the merchants more when someone uses one of those high-end cards - i.e. the merchant fees are higher if you use a 'Gold' or 'Platinum' or 'Black' or whatever card, often over 5%.
Krugman’s right on the surface diagnosis. Trump doesn’t have an economic philosophy. He doesn’t even have a corrupted one. What he has is a reflex. Reward allies. Punish resistance. Perform strength. Move on.
But I keep thinking the most dangerous part of that diagnosis isn’t economic at all.
It’s civic.
In earlier eras, even bad faith policy lived inside a story about the public good. Supply-side economics claimed to lift all boats. Deregulation claimed efficiency. Hypocrisy still gestured toward norms, even while violating them. That gesture mattered. It meant there was still something left to argue with, something to expose as false.
What Krugman is describing now is thinner and more corrosive than hypocrisy.
It’s emptiness.
When policy becomes transactional rather than ideological, it stops being about outcomes and starts being about compliance. Cutting taxes for the wealthy isn’t meant to grow the economy. It’s a reward. Rolling back environmental protections isn’t about markets. It’s a signal to donors and allies. A credit card interest cap isn’t consumer protection. It’s theater, timed for the midterms.
None of this is meant to work. It’s meant to be seen.
That’s the shift that unsettles me. When governance stops explaining itself, it starts testing itself. Each move becomes a probe. Will anyone stop this. Will institutions push back. Will the system obey if I simply announce something and dare it to resist.
Krugman notes that Trump governs by pronouncement. That line sticks with me. Pronouncements aren’t laws. They’re loyalty tests. They skip deliberation and dare the system to correct them. If the system doesn’t, the next pronouncement comes easier, and the ground shifts a little more.
That’s how republics hollow out. Not with a single rupture, but with repeated moments where law is treated as optional and spectacle stands in for process.
The credit card cap is revealing precisely because, stripped of policy debate, it asks a basic question. Does authority come from law or from declaration. From Congress or from the man who speaks the loudest.
Trump doesn’t care which answer wins, as long as it’s his.
Krugman’s comparison to Nixon is useful because it shows the break. Nixon abused power, but he still operated inside structures. He pressured institutions, but he acknowledged they existed. He sought legislation. He worked the machinery. Trump doesn’t bother. He posts. He announces. He waits to see who flinches.
That difference matters. Abuse inside a system is one thing. Indifference to the system itself is another.
Here’s where I think Democrats and the press sometimes miss the deeper danger. When Trump floats policies like this, the risk isn’t whether they pass. It’s whether we respond as if policy has already happened. Whether we debate merits instead of legality. Whether we treat declarations as governance simply because they’re loud and constant.
Krugman’s right to warn Democrats not to assist another charade. But the refusal has to run deeper than strategy. It has to be cultural. We can’t normalize rule by announcement. We can’t let dominance theater replace law just because it occasionally gestures toward a popular outcome.
There is a serious case for reining in abusive credit card practices. Krugman makes it well. Elizabeth Warren built an agency to do exactly that work. Trump tried to shut it down. That tells you everything you need to know. He doesn’t want protection. He wants applause.
So the question I keep returning to isn’t whether Trump believes in supply-side economics. He clearly doesn’t.
It’s whether a republic can survive once democracy is no longer even rhetorically useful. When leaders stop pretending they govern for the public good and start governing to see who will stop them.
That isn’t an economic question.
It’s a civic one.
And it’s the question we should keep asking, calmly and without distraction, every time a pronouncement replaces a law and spectacle asks us to forget how authority is supposed to work.
Great Analysis.
With affordability becoming harder and harder one wonders if personal debit and the distress it causes will become the motivating force for change.
Above all of the “things happening to other people” does the personal financial plight become the double edged sword for the election. Basically the same force that swept Trump back into power.
Conversely, is being an ICE Agent (hired goon) the only high paying job with (very limited availability) to a young person with a minimal skill set? How long before being an ICE Agent leads to the abuses and extortion so typical of gangs as seen in third world countries?
Isn't that already happening?
Correct....always has with vice, especially drug, cops.
The whole Renee Good episode: will it attract the exact wrong types to join the ever expanding ICE?
Looks like the shooter will get away with it.
I read on The Bulwark that Democrats (meaning Schumer) have ‘no appetite’ for shutting down the government over ICE funding. Hard to imagine that they will stand up for anything like consumer protections, although Trump would certainly love a photo op with Senator Warren. (Did he call her Pocahontas?)
If not now, when? If murdering citizens with impunity isn’t a reason to shut down the murderers, then what is?
I can’t express my rage at Democrat “leaders” who are merely asking for “restraints” on ICE murderers. What makes the Democrats think ICE will comply with their “restraints”? Did this administration comply with the recently passed law requiring them to release the Epstein files?
Our Democrat “leaders” don’t seem capable of learning. Murdering Americans requires a heavy and swift hammer. Where the eff is it?
I’m sorry, who are they again?
We had a big "No Kings, No War, No ICE" march in NYC on Sunday, and once again Hak and Chuck were AWOL. Protesters are starting to carry pictures of these Vichy Dems. Hak just voted to condemn "socialism" though Mamdani won his district and 25% of the NYC electorate call themselves democratic socialists. Hak declined to attend the mayoral inaugural. Chuck refused to endorse Mamdani, showed up to the inaugural but for once avoided all microphones and was invisible.
The “Vichy Dems” are beyond disappointing. But I think protest signs should focus on Trump and the deeds of his administration.
A shutdown brings attention to an issue. That's why the shutdown about the affordable care act made sense. ICE is getting plenty of attention with their thuggish behavior. You don't want to take away their rope while they're hanging themselves.
I thought that the previous shutdown was too narrowly focused (the whole shitshow is just wrong) … starve this beast
Around here, the ones starving were the people who depend on food banks and food stamps. You can't starve a beast that feeds from the U.S. Treasury trough.
We can’t expect Minnesota residents to die needlessly while we wait for enough people (how many?) to be outraged. The polls already have Trump underwater on his handling of immigration. Enough is enough.
The time for severe action is now.
… but they are also harassing and eventually shooting people along the way. They may harm too many people before they “hang themself”… they need to be stopped.
Smart consumers pay the balance of their accounts every month and pay no interest at all and some even get cash back. I do. So there ought to be a way to do this for more people. But I have no idea how it can be done. Any ideas?
The problem is that too many people are in dire straits, such that they can't afford the basic cost of living. So, they put essentials like food and clothing on credit cards, they get behind in their payments, and end up paying huge amounts of interest. Sometimes, they choose the alternative of payday lenders, which is even worse. Paying workers a living wage would help.
There is some truth to that, but a lot of people see credit as cash in their pocket. I think a bigger predictor of whether you use credit is how your family uses credit. My parents always paid off their credit cards every month and so do I. When I was suddenly single and poor, I didn't have a credit card because if I couldn't pay for it then, I wouldn't be able to pay for it later. I've been very vocal with my kids to avoid credit cards and so far, most of them have.
You can go overboard, but personal responsibility is important too.
I agree. I always pay off my credit card bill in full, as did my parents. I told my son when he got his first credit card that it is a convenience, not a substitute for money. I instructed him not to charge anything he didn't have the cash in hand to pay for. But some people are desperate. I forgot to add medical bills to the list of expenses that cause people to end up with high credit card balances. Long before she became a senator, Elizabeth Warren, along with others, did research in which they found that the major cause of bankruptcy was not people maxing out credit cards on extravagances, but medical debt. We need to fix our broken healthcare system.
YES, Ms Herz! A living wage starts at $25 an hour and rises to $40. Reich is right. Try multiplying $15 an hour and see if you can eat healthy food (giving up a roof over your head, of course and any medical attention).
Retailers pay a percentage to credit card companies on every purchase that the card is used for. I don’t like carrying a bunch of cash, but I make all my small purchases with cash, the bonus is that I’m not tracked every time I buy a pair of socks or a cup of coffee. My automotive mechanic gives a discount of the amount for paying in cash now. Hope more businesses will do the same.
Despite the fact that I use an cc for most things, it really angers me when places don’t have the option for cash or cc. Many places are going cash free. I’ve seen it at amusement parks, food halls, and a handful of other spots. They usually have a machine that will put cash onto a card. In theory, ok, but what happens at the end of the day when you have money left on that card? I haven’t looked that closely, but my assumption is that it’s basically locked onto that card, like a gift card. If a place is going to force a consumer to use that, they should have to refund the reverse at the end of the visit. Given that it’s a machine, I highly doubt that’s possible.
I have also seen the opposite, as you mention with the mechanic, usually small, hyper local businesses that encourage cash or check. They often pass a cc fee onto the customer. This one I have more mixed feelings. On one hand, it is a legitimate cost to them, one that is difficult to absorb and fair to pass on. At the same time, for some people, that is the only way they may be able to “afford” something like a car repair in an emergency. This is a perfect example that really shows who benefits and who doesn’t from credit cards. Small businesses and low income households are on the losing side while those with more money and the cc companies benefit.
I get a bit of a thrill from walking out of a business that won’t accept cash. There’s a place for credit cards like emergencies, as you pointed out. I don’t want to destroy that business, but it’s become predatory. I don’t want it to destroy us.
It does seem like it is an extra tax you put on yourself, and if it’s already added into the cost of everything then even people who pay cash are still paying into that system, adding to the burden for lower income households where even one or two percent on everything they buy is another stressor.
We live in a chiselers economy.
Just for the record, there are an awful lot of liberal politicians and do-gooders (e.g. ASPCA, Doctors without Borders, your alma mater) that don't directly charge you extra for credit-card fees, but do invite you to tax yourself an extra one or two percent as part of the transaction.
Not deceptive or exploitative, but I find it annoying just the same.
This doesn’t bother me since, at least in my experience, it has been optional. You can pay it to help them offset the fee, or not pay it and they eat the fee. We even give the option at very small levels where I’m involved, a school PTA (Title 1, so not raking it in) and a high school booster club (not title but still small budget). But it should be optional, only the fee amount, and clearly marked. Teri’s point is also valid. A lot of places are just marking up prices across the board and passing the cost on to everyone, burdening lower, middle, and fixed income the most.
It's not the non profits but the e-commerce platform that suggests users can pay the fee for using it. If the platform covers the fee, they're making a financial donation as well, it seems.
I’m not sure about larger places that integrate something into their own website, or whatever, but for us, again on a very small scale, we have always had the option from the platform (ie Square or a fundraising website) whether or not to include it. I appreciate the option…and that it is still an option even if you opt to include the option. 😉
Many businesses in this area charge an extra fee if you use a credit card for purchases. The gas stations began the practice and it spread during the pandemic. I recall many people being outraged and claiming they would never return to their favorite restaurant because it had begun these extra fees on credit cards. I guess they're only eating at Wendy's now.
Many people are woefully uneducated about credit cards. I recently found out that a friend did not know one can pay more than the minimum credit card payment. A 40-something adult with a college degree thought that was what all he was *allowed* to pay every month. It sounds ludicrous, but it tracks with many stories we hear whether it’s predatory loans, risky investments, etc. I would bet the vast majority of Americans, especially those from lower income households which this person is, do not have financial literacy. Some high schools now require it, but it should be a requirement for every school across the country.
Parents can teach the same. Our kids kept a tally of their allowance/gift income and purchases. It helped them learn to control impulse spending before they were in grade school, and helped with math.
Parents can teach financial literacy if they have it themselves, have the time, and if they see it as necessary. When I asked my dad to show me how to balance my checkbook (way back when) his answer was that when I got married, my husband would do that for me.
Teri is spot on. In this person’s particular case, he came from a family history of low income. That doesn’t inherently mean there isn’t financial literacy, but it often does and/or still looks different than for a person of more means. And other factors that may contribute to that, such as being black in the South in America, can mean that there has not been much if any opportunity to gain such an education.
Education. The HHS Department used to issue guidelines and suggestions to staying healthy. Why can't the government encourage people to save and spend intelligently with budgetary programs that reward users to pay off their debts rather than accumulate more. There is nothing illegal in the government advocating for its citizens.
It’s beyond the imagination of the current government, Mr. Deemer. The current government is only interested in robbing the poor to give to the rich.
Agreed but now is the time to plan for the time of change.
That's a good idea, however, it would counter the interests of the "masters of the universe". Maybe this is something that can be done when we get the ship called the US rebalanced.
Would you take health advice from RFK?
Good point but I remember a time when real professionals who cared about dispensing the truth worked there.
Yes. First of all, pay people a living wage. Second, we need a cultural shift away from materialism. Social media, especially short form video, is literally destroying human capacity for patience and contentment. Everyone wants this and that because they think everyone else already has it. And if they can't afford it, they just get it on credit.
I assume one reason people credit balances and pay the exorbitant rates is we do not provide basic financial literacy education to people. There is simply no valid reason to carry credit card debt. Their fees are also a burden on small business as we see some, particularly resturants, have started to add back those fees. For that reason I have started paying Resturant bills with cash. Benefits both me and the business.
US schools struggle to teach basic literacy, much less financial literacy. One must also assume that the lack of requirements for financial literacy classes is basically a conspiracy to keep people ignorant. The average person may not use algebra, which is a required course. But they most surely will need to understand compound interest.
Gary, One idea is Congress pass legislation that two people working full time should be paid enough wages that they can support a family which means being able to purchase a small house and provide essentials for their family. This insane K economy in which 10% are doing 48% of spending while families go hungry is not democracy. It is oligarchic capitalism. Soon we’ll be like Russia with the 90% barely surviving. Somehow, “we the people” must change the system. I understand this legislation would need to be done in small increments. We have to find a way to get out of this system.
One person working full time could manage that 50 years ago.
Higher minimum wage? Education? Better life prospects?