Credit cards might seem ubiquitous in today’s culture, but there are plenty of ways to build credit without a credit card. That’s not to say some people can’t benefit from credit cards, but both cardholders and non-cardholders should be aware of the scariest facts about credit card issuers. Banks, retailers, and credit card companies wouldn’t be quick to volunteer this information, but it’s important for consumers to know more about this mysterious, multi-billion dollar industry that holds so much power in Washington.
Despite increased regulations put in place by the CARD Act of 2009, credit card companies are still doing plenty of shady things you should know about. Here are some of the many cases in which the credit card industry would prefer you were ignorant.
1. There is no federal law that sets a maximum APR
While your credit card may have a maximum interest rate stated in its “terms and conditions,” there is no legal cap. Many states have usury laws that regulate interest rates on all loans, but they only apply to banks based in that state. That’s why the major credit card companies are incorporated in Delaware or North Dakota, where there are no usury laws. The average interest rate was 14.9% in April 2015, but penalty interest rates typically hover around 30%, and one subprime credit card issuer staunchly defended its 79.9% APR credit card in 2009.