BIO

Cliff Mason is the author of Millennial Money. He is the Senior Writer of CNBC's Mad Money with Jim Cramer, and has been that program's primary writer, in cooperation with and under the supervision of Jim Cramer, since he began at CNBC as an intern during the summer of 2005. Mason was the author of a column at TheStreet.com during 2007, which he describes as "hilarious, if short-lived." He graduated from Harvard College in 2007. It was at Harvard that Mason learned to multi-task, mastering the art of seeming to pay attention to professors while writing scripts for Mad Money. Mason has co-written two books with Jim Cramer: Jim Cramer's Mad Money: Watch TV, Get Rich and Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer). He is 100% responsible for any parts of either book that you did not like. Mason has also had a fruitful relationship with Jim Cramer as his nephew for the last 23 years and will hopefully continue to hold that position for many more as long as he doesn't do anything to get himself kicked out of the family.

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Dec.17

4:17 PM ET

Wednesday, 17 Dec 2008

"High" Credit Card Interest Rates—Give Me More!

Posted By:Cliff Mason

Topics:Interest Rates | Credit Cards | Stock Market

Companies:American Express Co

Give me high interest rates or give me death! Today CNBC guest blogger Patricia Chadwick laid into banks and credit card companies, calling high interest rates on credit card debt "a noose around consumers' necks."

I'm sorry, but I can't agree for one very simple reason. If credit card companies couldn't charge such high rates, they wouldn't be willing to lend. The same thing is true with payday loan companies, which are always coming under heavy fire for the outrageous looking interest rates they charge. But when states pass laws saying they have to give their customers better rates, payday lenders stop operating.

Credit card interest rates are not, as Dorn says, "utterly abusive to consumers." Credit card debt is unsecured, unlike say, a mortgage or an auto-loan where if you can't pay, the lender can seize your house or your car. And the 4.9% delinquency rate on credit card debt that Dorn cites as proof that high interest rates are a terrible burden on consumers is also a the main reason why credit card interest rates are so high. If the credit card companies know that they're not going to be paid back by more and more borrowers, then they have to charge even higher rates in order to turn a profit.

These companies aren't exactly rolling in dough right now. American Express[AXP Loading... () ] is three points off its 52-week low right now. That doesn't sound like a company that's making a fortune by squeezing consumers.

The Fed and Treasury have already had to institute a program to help institutions buy securities backed by credit card debt so that these companies can keep extending people credit. If we pass laws saying they can't charge high rates, they'll do even less lending.

And as I've pointed out before, when banks and credit card companies lend less, it's the people with little credit history, low credit scores and few assets that get hurt the most. That describes young people and poor people. Strange as it may seem, we're the ones who benefit the most from credit card companies being allowed to charge high interest rates.

If you think the interest rates on credit card debt are high, you should check out the interest rates that micro-lending charities use because those are much higher. Micro-lenders are charitable organizations that make small loans to groups of people in developing countries who couldn't otherwise get credit. They'll charge 80% or 90% interest, and we consider them, justly, great humanitarians.

I won't defend the chicanery of credit card companies unilaterally raising your rate without telling you or hitting you with hidden penalties, but high interest rates? Please, gimme more!

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