Jack Layton recently kicked off the NDP federal campaign by announcing that they would put a cap on credit card interest – no more than 5% above prime. This “promise” has been trotted out by Layton in at least two previous elections.
This proposal has about as much chance of being enacted – NDP or no NDP – as me waking up tomorrow morning and finding palm trees growing in my back yard. It just isn’t going to happen.
Credit card issuers say they need obscene rates of interest to cover their costs and pay for card holders who default. There’s probably some truth to that. In any case, you can be sure that if the banks couldn’t make huge profits off consumers by issuing credit cards they would figure out some other way to do it. The first thing they would do would be to start charging significant fees on debit card transactions.
In a perverse sort of way high interest rates actually do their part to discourage the use (and abuse) of credit cards. Layton can “help Canadian families” a lot more by encouraging them to stop wracking up large credit card bills.