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

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 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!

Questions? Comments? Send them to millennialmoney@cnbc.com

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