Banksters claim that if they don't charge exhorbitant rates on credit card debt, their money supply will shrink and there will be less high interest rate credit card money to sprinkle onto other deserving souls. Lets put this ridiculous argument to rest.
First off, banks can get free money from the fed. I don't know if it is as easy to get free money for unsecured debt as it is for home mortgages, but the interest rate the banks charge on unsecured debt is astronomically higher which should make up for the fact that the loan is unsecured.
However, it is time to realize that credit card debt cannot continue to rise forever. Consumer credit card debt needs to be a closed loop system. At some point, the credit card debt NEEDS TO BE PAID BACK, this is a fact the banks REFUSE to acknowledge.
If ever there was a time when consumer credit card debt needed to be paid down and paid back, it would be now. However, now is the worst time for many consumers to be paying back their credit card debt as many are struggling to just pay their mortgage, utilities and food bills each month. This is why the banks, and our government, need to step up and offer consumers credit card debt interest rate reduction incentives.
The consumer, the banks, federal governments and local governments WOULD ALL BENEFIT from a credit card debt interest rate reduction incentive program, I'll outline how, AND NO NEW TAXES WOULD BE REQUIRED.
If one wants to avoid artificial methods to fake an economic recovery, (such as raising taxes that create pork projects), the best way in my opinion is for people to pay back what they owe, but in a manner which does not cause them economic hardship. Because consumers would actually be paying DOWN their overall credit card debt (with a severely reduced credit card interest rate incentive program), a higher percentage of unsecured debt would actually be paid back rather than lost to default, and many, many, many good things would happen as a result.
Consumers who are in a position to pay down their credit card debt if the interest rate were reduced to near zero percent, (how about 2.9%), would be able to both begin paying down their credit card debt while still respending a modest portion every month as well. The ability to pay down an existing credit card debt while also being able to respend a smaller amount than what is being paid down every month is the entire key to a main street economic recovery.
1. The banks benefit from a more stable income of money each and every month from their unsecured accounts.
2. The consumer benefits by being able to stretch their income so they can still make small purchases every month even as they reduce their overall credit card debt.
3. The consumer is in a better position to make their HAMP or mortgage payments as well as they reduce their overall consumer credit card debt load.
4. Local cities and states benefit since less foreclosures result in a SIGNIFICANT increase in property tax income and less strain on their court system as well.
5. As the credit card debt interest rate reduction incentive program ages, consumers will have more and more of their own income staying in their own wallets, resulting in an increase in savings, and or spending on local products and services, which in turn may help reseed small businesses.
6. Consumer reliability begins to grow, which once again benefits the banks and their long term investments in home mortgages.
7. As a certain percentage of consumers are able to get out of debt, their spending power begins to create green shoots for other consuers who are still looking for work. The result is more and more people now have a better chance at a long term job and can be relied on to take care of their own financial obligations.
8. Small businesses can begin to create green opportunities without use of massive amounts of federal funds or "tax breaks" as more and more consumers actually have spendable money and also ok with the idea of long term savings.
9. Best of all, NO NEW TAXES or pork projects would be required!
Until a credit card debt interest rate reduction incentive program is offered to those who can afford to pay down their credit card debt, I believe we are being deceived by those in power into believing it will take other sources of income to fix what consumers could actually fix themselves.
You can read the SHORT, four point economic program that incorporates the above ideas plus two other simple, logical ideas that would accelerate economic stability at Wall Street Change.