Interest Limits on Credit Cards

This month I have been notified by two of my credit cards that they are increasing their interest rates to 21%--one from 18% and one from 16.9%--at a time when other interest rates are all declining. The banks claim this is necessary to offset the cost of cardholders who declare bankruptcy despite evidence that high profitability on these high-interest rates more than offsets bankruptcy losses.

Yet both of these credit cards came to me as unsolicited “pre-approved” offers. These credit grantors sent out wholesale offers of credit to minimally screened recipients, expecting those who are responsible to cover the losses from those who are not.

I simply canceled these two accounts and transferred my business to financial institutions offering incentives for preferred customers. As increasing numbers of consumers do the same, those banks charging the highest rates will suffer the greatest losses and join the ranks of other irresponsible financial institutions who caused the current banking crisis by making irresponsible loans.

While I prefer to address this issue with voluntary compliance and incentives, I also support current legislative action to limit the most extreme excesses of greed and incompetence, to prevent banks from further eroding their base of responsible customers at the risk of additional damage to the stability of the banking industry.

DOUGLAS DUNN

Oceanside