The Trump Card: Cap credit card interest at 10%.

September 23, 2024

Doughnut Trump is an accidental political genius, a genius populist actor (GPA). His most recent, and maybe best populist proposal of all time? A temporary cap on interest on credit cards. 

How does Trump come up with these great populist ideas? 

Like all geniuses, Trump connects the dots between different concepts and ideas. 

Trump saw in the news that the Federal Reserve lowered interest rates citing among other reasons that Americans are holding record high balances on credit cards. Trump knows that credit card debt is the worst kind of debt simply because interest rates are relatively high. Voila! 

That's all Trump needed to know to come up with a fantastically popular populist idea of temporarily capping interest rates on credit cards at 10%. The banking industry is already super opposed and Trump is back heading all political news headlines. Genius!

Capping interest rates is such a socialist if not communist or Taliban idea that no one in the Republican party ever saw it coming. Trump's populist proposal of capping interest rate at 10% may never materialize because Congress may neve approve it. Special interests and the establishment will lobby heavily against it. The media, although leftist in essence, will have to go against it because it's Trump's idea. 

The proposal doesn't have to materialize to be effective. What matters is that it gives Trump publicity, and there is no negative publicity in politics. The proposal makes Trump look as the hero of all Americans trapped by credit card debt at higher than 10% interest rates.  It's a brilliant populist proposal. If it had come from Kamala, she would be called a socialist and a communist. Coming from Trump, it's a brilliant temporary measure to help all Americans. 

Below is a brief history of credit cards, the pros and cons of using them, and some tips to reduce credit card debt.

History of Credit Cards

Credit cards began in the mid-20th century. The first bank-issued credit card was created by Frank McNamara in 1950, known as the Dinercard (later Diners Club). The Diners Club allowed customers to use them to pay at select restaurants.

While dining with clients at Major's Cabin Grill in New York City, McNamara realized he had forgotten his wallet. His wife had to pay the check, which was an embarrassing experience that he vowed to avoid in the future. McNamara came up with the idea for a multipurpose charge card that would allow people to avoid having to carry cash or a check. He discussed the idea with the restaurant owner and his lawyer, Ralph Schneider. 

In February 1950, McNamara and Schneider returned to Major's Cabin Grill and McNamara paid the bill with a small cardboard Diners Club card. This event is known as the "First Supper" and is considered the beginning of contemporary credit card industry. 

Diners Club became the first major multipurpose charge card issuer, and its widespread acceptance among merchants paved the way for other credit card companies such as Visa and Mastercard. Visa started as the BankAmericard in 1958, it was rebranded to Visa in 1976. It became a major player in the credit card market, focusing on international acceptance. Mastercard began in 1966 as the Interbank Card Association (ICA), and was rebranded as Mastercard in 1979. It also aimed for global acceptance and partnerships with various banks.

How Credit Card Companies Make Money

Credit card companies make money by charging fees and interest. 

• Interchange fees: When a consumer uses a credit card, merchants pay a fee to the card issuer, which is known as an interchange fee. This is typically a percentage of the transaction amount. 
• Annual fees. Many credit cards charge an annual fee to cardholders.
• Late fees: Credit card companies also charge fees for late payments.
• Interest: If cardholders carry a balance from month to month, they incur interest charges, which can be quite high. 

Growth of Credit Cards

Credit cards became widely accepted and popular throughout the 1970s and 1980s, leading to a significant increase in their usage. The introduction of electronic payment systems and online shopping in the 1990s and 2000s further boosted credit card usage. Today, credit cards are a primary payment method globally, with advancements such as contactless payments and mobile wallets in smartphones.

Advantages of Using Credit Cards

1. Rewards. Many credit cards offer rewards points, cashback, or travel benefits for purchases, which can be redeemed for various rewards.
2. Credit History: Responsible use of credit cards can help improve credit scores, which is beneficial for future loans and mortgages. 
3. Convenience: Credit cards offer a convenient way to make purchases, both online and in-store, without carrying cash. 
4. Consumer Protection: Credit cards often come with fraud protection, allowing users to dispute unauthorized charges.
5. Emergency Funds: Credit cards can serve as a financial safety net in emergencies when cash may not be readily available.

Disadvantages of Using Credit Cards

1. High Fees: Many credit cards charge annual fees, and late payment fees.
2. High Interest Rates: If balances are not paid in full, high interest rates apply. 
3. Debt Accumulation: Easy access to credit can lead to overspending and compounded debt.
4. Impact on Credit Score: Late payments or high credit utilization can ruin credit scores.

Tips to Reduce Credit Card Debt

1. Budget: Track income and expenses to identify areas to cut back and allocate more toward debt repayment.
2. Pay More Than the Minimum: Always pay more than the minimum payment to reduce debt faster and minimize interest charges.
3. Snowball Method: Focus on paying off the smallest debt first while making minimum payments on others, then move to the next smallest.
4. Negotiate Lower Interest Rates: Contact your credit card issuer to negotiate lower interest rates or look for balance transfer offers with lower rates.
5. Stop diggging. Stop using credit cards while paying off debt to prevent increasing balances.
6. Set Up Automatic Payments: To avoid late fees, consider setting up automatic payments for at least the minimum amount due.
7. Seek Professional Help: If debt becomes overwhelming, consider consulting a credit counseling service for guidance.
8. Vote for Trump? 

Credit cards offer convenience and potential rewards but can lead to significant debt if not managed carefully. Understanding the history, mechanics, advantages, and disadvantages of credit cards is crucial for making informed financial decisions. Following practical tips can help reduce credit card debt and promote healthier financial habits.

Now you know it. 

Live well. Die better. Enjoy.

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