If Politicians Really Wanted To Help Out Consumers They Would Cap Interest Rates

In my last post I discussed the flaws in just one of Canadian Finance Minister Jim Flaherty’s credit card reform proposals, yet there are others.

Like the U.S. reform bill, at least half of what has been proposed isn’t going to be of much practical help to consumers in helping them get out of debt.

For instance, when you’re getting over your head in debt because your credit card interest rate has just been doubled, getting a 21-day notice or a 45-day notice that your rates are going to double is not likely to be of much long-term value in planning your exit strategy.

What you really need is for your rates to be capped so you can pay off your debt.

If  the U.S. or Canadian governments really wanted to help consumers get out of debt, both these countries would put a cap on interest rates. Prime plus five or six percent has been suggested as a fair return on investment for lenders. 

FLAHERTY’S RESPONSE LACKS REALITY

Flaherty’s response to that suggestion revealed that he really does not understand - or else he doesn’t care - about the plight of the average Canadian.

He claims there are “a lot” of low interest credit cards available for consumers.

Not for the ones who need them the most, Jim.

Plus, the low interest rates that still exist are likely to be for introductory periods only and those are likely to dry up once the new U.S. bill takes effect.

THE ANSWER: PERSONAL FINANCIAL LITERACY

As for the U.S., the credit card industry still has ten full-time lobbyists for every part-time activist trying to get the U.S. Congress to give a fair shake to the American consumer so he can get himself out of debt.

Proof of this is in the fact that the U.S. bill does not go into effect for another year.

Bottom line, when those making our laws do not fully understand - or seem to care - about the impracticality or gaping holes in their own proposals, we must take up our own cause.

Personal financial literacy, therefore, must be a priority for every consumer, and educating our politicians is a must.

To that end I recommend The Secrets of Money: A Guide for Everyone on Practical Financial Literacy for an overview, and Money-Saving Credit Card Secrets for facts about credit card companies and managing credit cards that you won’t find anywhere else.

Then write to your representatives that, without a cap on interest rates, the reform bills being touted just aren’t going to do anyone - except the CEO’s and shareholders of credit card companies - much good.