Credit card companies say high interest rates make sense
They also say decisions to suddenly change your interest rate without warning also makes sense. Oh, and it's also completely fair of them to change the interest rate on past debt.
Get a load of what they told Congress here.
This is in no way defending consumers who spend beyond their means, but let's examine how ridiculous this concept is in the story.
Janet Hard, of Freeland, Mich., for example, told senators that the rate on her Discover card rose from 18 percent to 24 percent in February. She said a Discover representative explained to her that the company did a spontaneous credit report and determined she was at risk of default.
So you want Hard to pay her debt. But, you examine her credit history and decide that she's a risk and could default. So to make certain that she will have an even harder time making her payments and then almost certainly default on her payments, you raise her interest rates.
How does any of that make sense? It's mind-boggling.
Comments
Makes perfect sense to raise rates on those people who are appear to be a greater risk. That being said, those rates are insanely high so I don't agree with where they are set (18% to 24%), but you price based on risk. More risk, higher rate.
Posted by: You know who | December 5, 2007 1:42 PM