Twenty-one percent interest as a way of life is bleaker than bleak. From Charles Hugh Smith at oftwominds.com:
When 21% interest rate credit cards are the only thing keeping the lid on awakening and revolt, that’s not a sustainable fix.
The easy credit, high interest rate swindle has been a financial feature of the landscape for so long it’s rarely examined for what it is: not just a reliably profitable swindle, but as a safety valve for a broken system. We all know how it works, either from experience or observation: credit cards are distributed like candy on Holloween, with one little kicker: a dose of financial fentanyl is included: insanely high rates of interest, i.e. 21% and up, and rapacious late fees.
The credit card issuers know most of the uncreditworthy creditors they sent cards to will eventually default, but this is fine because the high interest rates and stiff penalties will extract enough wealth from the debt-serfs to make the game profitable. This foreknowledge is what makes it a swindle: we know you want credit, we know you’ll quickly get over your head and owe us a balance, and we know the exorbitant monthly interest on that ballooning balance will eat you alive, and you’ll default.
But we also know enough of you will struggle on, paying the interest and penalties, for long enough to make the swindle profitable: the writedowns of defaults will be more than offset by the interest and penalties.
All this is obvious, and dismissed as “the free market in action:” nobody forced folks to accept the credit card, or forced the company to issue the cards, everyone knew the interest rate was 21%, and so high interest and defaults are just desserts to all involved.
