Lower Credit Card Rates

Banks are evil. They prey on consumers with their high bank fees and high credit card rates, and offer little or no interest on savings.

Under the current economic crisis, what have banks elected to do?  Charge higher credit card interest for those customers who are late paying their bills.  In fact, some companies have increased interest rates on their credit cards citing “Uncertain times for companies offering credit” as the reason.

This is the mentality of the entire credit establishment, especially the big banks – charge customers more interest making it more difficult for them to carry their credit card debt, increase our bottom line while driving the country further into recession.

I’m not a fan of banks.  They are high up on my list of things I dislike, just above having a root canal done without drugs!  Still, I recognize the importance of banks and credit card companies in today’s economy.  I do question their tactics in times of economic uncertainty.  I also question a political regime that continues to allow these organizations to operate pretty much unregulated.

Credit card debt is at its highest it has ever been.  Many credit card customers are now facing the grim reality just weeks after their holiday spending.  With the amount of credit card debt on the rise, what is the solution chosen by the banks to lightening the burden on consumers?  Charge them more interest.  Many of the banks have issued notices that interst rates on credit cards are going up, and others have started charging premium interest rates for customers who are late paying their bills.

Senator Pierrette Ringuette, a Liberal senator from New Brunswick has started calling on the Federal Government to regulate the credit card industry and cap interest rates.  Senator Ringuette is not alone as Alberta Premier Ed Stelmach has encourged Prime Minister Stephen Harper to consider limiting credit and debit processing fees.  In fact, Jack Layton of the New Democrat Party has called for this over the last several years.

Still credit card rates continue to soar and banks continue to stick it to customers.  But wait, it is not just the consumers, it is also the businesses that are feeling the pinch.  Banks and credit card companies percentage of every transaction conducted with credit cards and debit cards.  The whole shift towards a “cashless” society has the banks swimming in money collected primarily from fees and interest.

What has the Federal Government of Canada done about this?  Absolutely nothing!

The key lending rate established by the Bank of Canada was just lowered to 1 percent.  Yet banks and lending institutions are raising their interest rates on loans, mortgages and credit cards.  Some credit card rates have soared to close to 25 percent, while others offered by retail outlets sit at close to 30 percent.  Yes, you read that correctly, 30 PERCENT!

A quick survey of credit card companies and their interest rates reveals why Senator Ringuette is concerned and raising alarms in Ottawa.  Just take a look at some of the interest rates charged by credit card companies:

- Sears – 28.8%
- HBC – 28.8%
- TD Canada Trust (Visa) – 19.75%
- Bank of Nova Scotia (Visa) – 19.5%
- Bank of Montreal (Mastercard) – 19.5%
- CIBC (Visa) – 19.5%
- Royal Bank (Visa) – 19.5%

Many of these credit card companies offer “low interest” variations of the card, but often tack on an annual charge to get the low rate.  Some still charge between $8.00 and $120 a year for the right to use the cards at these high interest rates.

When asked about the fees, banks indicate that these fees go towards the administration of the cards, to help offset the costs associated with collecting payments, management of “rewards” programs or to obtain  “lower” interest rates.  These fees are assessed regardless of whether a consumer uses the card or not.  Banks are quick to point out that credit card debt is “unsecured” debt requiring no collateral to obtain.

The Canadian Bankers Association has stated “It’s important to remember that credit cards provide valuable access to unsecured credit with no collateral requirements.”  To that I say – Bullshit!  Credit cards provide another avenue for banks to screw consumers.

With the Bank of Canada rate sitting at 1 percent, why are banks charging such high credit card interest rates to consumers?  The answer to this question is simple – because they can.  The Federal Government is doing nothing to protect consumers and the banks are taking advantage of the situation, exploiting an opportunity to hand it to consumers right up the behind with high interest rates and fees.

The credit card market is flooded with approximately 68 million credit cards, and over 27 million of those carry a balance.  Those 41 million cards that go unused, what happens to them?  Well, some banks charge an “inactivity fee” that ranges from $10 to $25 a year.  You read it right, for those consumers who are being fiscally responsible, not using their cards and keeping them for emergency situations, the banks and credit card companies want to force you to use the cards.

This happened recently with a credit card that I held from the Bank of Nova Scotia.  The card was assessed with a $10 inactivity fee.  After calling customer service and ask that this be removed, the customer service specialist promptly agreed and said that this was “something charged to remind people that they have the card and that they should use the credit card more often.”

The credit card industry has become a cash cow for the banks and credit card companies.  This is an attempt to milk every last dollar out of consumers.  Technology Strategies International, a research firm that has examined the credit card industry has estimated that 38 percent of consumers expenditures will be credit card payments by the year 2013.

The Federal Government of Canada has to regulate credit cards and associated banking fees.  Allowing this to continue has the potential to destroy the economy.  Consumers must be protected.  If this results in a decreased availability of credit cards then sobeit.

There is no denying the credit card industry is taking advantage.  One can only ask how much longer will this continue.

Tagged as: banking, credit card, debt, Finance, money