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The Effect of Legislation of Credit Card Interest Rates...

posted by Adam Levitin

Is a drop

According to Bankrate.com, credit card interest rates stayed steady for low-rate cards and dropped for some high-rate cards.  So what this means that the Credit CARD Act has resulted in lower interest rates, right? 

Of course not.  That's a pretty obvious ex-post ergo propter hoc argument that doesn't proove anything.  But you can bet we'd see exactly the same sort of argument being made if rates had gone up (and we assuredly will the next time rates do go up).  No conclusive evidence need apply.  Never mind that the legislation hasn't even gone into effect yet.  Flipping through the cable stations, I saw no less a luminary than Mike Huckabee on Fox saying that one of his interviewees was having trouble getting credit because of the legislation.  I believe in anticipatory effects, but really, what issuer would shift away from a juicy business model a minute sooner than required? 


It is true that interest rates have been stable this past few months. With the bill saying that credit card companies cannot raise rates until they will inform consumers first and laws prohibiting them from increasing interest rates are good news.
As for the fact that credit cards companies are more strict in approving applicants. I think it is their right to eliminate applicants who do not meet their qualifications. Credit card companies are looking for responsible people who can pay their bills on time as well as their capacity to pay debt.

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