Should the Government Limit Credit Card Interest Rates?
The question in the headline is one of principle beliefs. Some believe that when the government gets their hands into private business it can destabilize a truly free market system. Others may see some benefit to the government forcing a cap on the interest rate that credit card companies can charge. Government regulation always has been and always will be debated. While it may be tough to argue against the short-term benefit of such caps the long-term outcome is unlikely to be good. The recent economic situation, dating from 2007 through today, has been extremely difficult on consumers yet consumers will always control the market. As we all learned in Economics 101 the laws of supply and demand will always balance the market. Here are two interesting facts to back that statement up: The average interest rate on credit cards has increased over 2.6% since mid-2009. Consumer debt as a percentage of disposable income has decreased about 5.5% since late 2007. So lenders have increased their rates and in response consumers have greatly decreased the demand on borrowing. Many, perhaps, have even stopped borrowing. What makes this whole supply and demand issue a bit more intriguing is that consumer spending [...]