Credit card rates are rising...

[SHRED]

...yet we can only get 0.5-1.0% return on a CD (of any size).

Can someone explain this?


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Interest Rates: The Era Of Cheap Credit Is Over
http://www.huffingtonpost.com/2010/04/11/interest-rates-credit-the_n_533205.html


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[ixion]

1. Explanation: The playing field is rigged to take your money

not return it.

[hobbit709]

2. The banksters got what they wanted. Next question?

[xchrom]

3. And yet the powers that be

Complain when Americans don't save more.

Rigged game with willing victims is what comes
to my mind.

[RKP5637]

4. Agree so much! The interest return rate is criminal. Frankly, we now have

organized crime in the banking and financial sectors blessed as legal.

[slackmaster]

5. Barclay's raised mine to almost 30% in January, and I'll tell you what I've done about it

I have paid off the balance every month since they sent me the notice, so I haven't paid them a penny in interest since before the increase.

The rate on my home equity credit line is about 4.25% right now, so it would make absolutely no sense to borrow money at 30%.

[Warpy]

7. It would make a great deal of sense to dump that card

or at least get an emergency card with a lower rate.

The last thing you need to do is charge an unforeseen expense on a 30% card. The next to last thing you need to do is jeopardize your home by using it as an ATM.

[slackmaster]

9. I have another card that has a much lower interest rate, and it's tied to my checking account

Both for automatic overdraft protection, and automatic minimum payment on the credit card.

Fuck Barclay's. Because they insulted my by raising my rate, I'm sticking it to them by floating money from them without paying interest.

[Warpy]

6. There's always a gap between interest we make and interest we pay

and that's how banks make their money.

While the gap between credit card and CD interest might seem unconscionable, credit cards are by and large still offering bargain rates for unsecured, high risk consumer loans. The gap between CD interest and home mortgage interest is about where it always was.

But yes, credit cards are heading back to that standard 18% interest rate, one that was decided upon in the 60s as being a fair return on a high risk loan.

The cure for that feeling of being ripped off by banks that collect a lot and pay a little is reducing what they collect: stay out of debt beyond an affordable mortgage.

[SHRED]

8. I am debt free minus the mortgage

It's just that I have a substantial chunk that was gaining me 4% a couple of years ago in a CD.

That has changed obviously.

---

[Another Bill C.]

10. When I was young

the banks operated on a 1% differential. Savings interest was 5% and loan interest was 6%. And the banker was still the richest man in town.

Standard mortgage interest was 6% except that FHA loans were 5-1/4%

This changed in the early '70s when mortgage rates began rising and usury laws were repealed.

[Igel]

14. Lots of things changed it.

Inflation made for higher interest rates--you don't want to loan at 3% if you think that the next 20 out of 25 years will see inflation at 8%.

Credit became very cheap since the '60s. Which meant 2 things (off hand): that a lot of people that shouldn't be trusted with credit were trusted with credit; that a lot of people who could be trusted with credit got more credit than they could be trusted with. It's one thing to have a mortgage and no debt and lose your job; it's another thing entirely to have a first mortgage, an equity-based line of credit, and 3 "major" credit cards. You've leveraged your future income for present use; and the bank's out on a limb.

Of course, in late 2008 cheap credit to high-risk borrowers was a scourge of banking and banks were told to tighten their credit policies for the good of the country. Then a lot of people complained because they couldn't get credit and banks were told to loosen their credit policies for the good of the country. The good thing is that consumer debt's on the decline.

Then there's the rate the Fed charges banks. When banks can rent nearly unlimited amounts of money from the Fed for under 1% interest, why should they pay you any more? Until that interest rate's increased you won't see CD interest rates go up. Esp. when there's a lot of money out there chasing high interest rates; the effect is to push the rate down.

That's okay. Look for rates to go up. Then there'll be the conflict--do we want higher interest rates on investments (people like my mother, retired, depend on them) or lower interest rates to keep housing demand from slumping?

[msongs]

11. goal of banks = make profit, customers are irrelevant, law of supply/demand is suspended cuz

if supply/demand was in force banks would be paying higher rates to draw money and customers instead of paying lower rates than everyone else.

Msongs

[Coyote_Bandit]

12. Because there are no bankers

The banks may extend some credit and they may pay some interest but the days when they earned their profits and paid their operating expense based on the difference between the two are long gone.

Today the banks make their money from (1) charging interest rates that may have little to do with the market cost of lending (often tied instead to federal reserve rates) and (2) charging fees for almost everything one can imagine.

[galileoreloaded]

13. Credit? Who cares about credit? What is credit needed for these days?

To buy one of the millions upon millions of empty and unneeded homes only to watch it's value erode and your down payment dissipate to nothing?