1.
According to Investopedia “A credit card is a thin rectangular piece of plastic or metal issued by
a bank or financial services company, that allows cardholders to borrow funds with which to pay
for goods and services with merchants that accept cards for payment”. If we investigate the
history of credit cards beginning, credit cards started to take off and become a huge business
from a state called south Dakota in USA. Before credit cards companies started to flock into
south Dakota, the state was facing a nation-wide double-digit inflation and recession. Inflation
decreases the value of money and increases the price of goods and it fast tracks the recession.
In that period south Dakota decided to get rid of a law called usuary law which puts a cap of
interest rates. Now banks and mortgage firms can charge any interest rate they want. Citi bank
saw an opportunity and decided to move their credit card department to south Dakota. Another
reason behind this move is the supreme court ruling of “Marquette decision” which gives
lenders the power of export their interest rate. After city bank, other banks and credit card
companies started to set up their business in south Dakota.
2. Average Americans are carrying a credit card debt of 8000 dollars. In an average household family
both husband and wife work to boost their income, however sometimes family struggle to met with
all their financial needs and use credit card to bridge that gap. Most common reason behind missing
a credit card payment is one or both spouse losing their job, family member getting sick, death or
divorce. When muller family missed credit card payments, credit card company started charging
them extra interest rates and late fees to their bills. Eventually mullers family credit card debt
increased to 80 thousand and they had to declare bankruptcy.
3. Line of credit is a good backup plan for any kind of emergencies. Credit cards also makes you feel
financially secure because you know that you have money to spend. I think the four people are
obsessed with credit cards and they try to ignore the issues with credit cards. Those four guests did
show some sign of worry, when they heard that your credit card will increase interest payment
when you miss a home or car mortgage payment. Overall, I felt that those consumers had the basic
idea of credit cards like most of us do. And they enjoy spending money which they do not have.
Although One of the people was looked concerned to know how much time you need to pay off
credit card debt.
4. Credit card interest rate can change in one night without even a warning. If a credit card holder
misses a payment or somehow credit card company found out that a person before has missed a
payment with another credit card company, the rate can increase. There are different kind of credit
card fees a holder can pay. For example: annual fee, late charge fee, over limit fee. there are no
limits on these fees and there is no regulation on these fees.
5. The OCC (Office of the Comptroller of the Currency) is the regulator of the national banks. They have
3 goals, making sure banks do not lose their integrity, make sure they deal fairly with the customer
and if banks do not deal fairly taking enforcement action. Providian was a financial corporation
which was issuing credit cards to risky and questionable customers. They were involved in
questionable procedures and policies. the Better Business Bureau of Oakland, California and the
District Attorneys of San Francisco and New York criticize the OCC because the OCC did not take any
action against Providian, stating it is not a problem for occ at that moment.
6. Cite some arguments you noted in favor of and against tighter regulations of the credit card industry
(interest rates, fees, marketing of cards)
Credit card companies generates more companies nationally than any other industry. Credit card
companies do have unethical business practices. For an example, if people knew how much time
they need to pay off their credit card debt, borrower might deposit more to clear that debt.
However, credit card companies never disclose that information. Credit card companies argues it
will be harder to calculate the time and rates. Personally, I do not believe it. Credit card company
should come with a warning like a pack of cigarettes. Consumer has the right to know what they are
getting into.
7.
INTEREST
RATE
MINIMUM
PAYMENT
FIXED
PAYMENT
12 percent
2%
19 percent
2%
28 percent
2%
0
$250
$500
0
$250
$500
0
$250
$500
NUMBER OF
MONTHS TO
PAY OFF DEBT
TOTAL
INTEREST
PAID ON $8000
306
39
18
667
45
19
667
7544.87
1689.92
761.81
28,297.48
3244.50
1,299.15