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Cramer on Credit Cards: Educate, Don't Regulate

Credit-card stocks seemed to survive a potentially difficult meeting between President Obama and some of these firms’ CEOs. The White House and much of Congress are pushing for new regulation to prevent sudden fee increases, require clearer agreement language and other changes to protect the consumer. Unsurprisingly, credit-card companies are pushing back.

Cramer mentioned Capital One specifically, during Thursday’s Stop Trading!, as one stock that was headed higher after the meeting, given the president’s tempered statements to the press this afternoon.

The government should focus more on educating consumers, Cramer cautioned, than demanding a limit on the interest rates these companies charge. In fact, higher rates for less credit-worthy customers and late fees are a part of the business plan. Otherwise, these companies “would go out of business in about six months,” Cramer said. So the paradox of credit cards is that consumers who pay off their balances every month actually benefit from those who don’t.

Elsewhere, Cramer reiterated his previous statements that Burger King and McDonald’s were two different fast-food companies, and that BK’s underperformance was in no way a reflection on McDonald’s.

“It drives me crazy that people were going to say that if Burger King was bad, McDonald’s [would also be] bad,” Cramer said. That’s the “wrong correlation.”

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