Question: I received a call from my sister this morning asking me for help regarding her credit card debt. According to her bank and credit card issuers, they are raising their credit card interest rates because they have to pay the Feds. My sister’s interest rate on her credit card went from being 13 percent, while this debt was owned by Washington Mutual, to 27 percent after they sold it to Morgan Chase. How much truth is there to this claim? Is this really happening?
Paul Solman: “Because they have to pay the Feds”? Balderdash. Fiddlesticks. Nonsense. Unless what the banks mean is: We want to make as much money as we can, to pay the Feds back, so we can more easily…make as much money as we can. Which is, after all, how banks work.
Banks raise rates because they CAN. And if you were lending money to your sister, and she WEREN’T your sister, mightn’t you too raise the interest rate if, say, you thought there was an increased chance she’d have trouble paying you back? And she had no good alternatives?