“Postal Banking” is a Terrible Idea

By Jon Decker

Excerpt from the National Pulse

Recently, Senator Bernie Sanders (I-Vt.) and Representative Alexandria Ocasio-Cortez (D-N.Y.) unveiled a proposal that would cap credit card interest rates at 15 percent. As you probably surmised, enacting a proposal like this into law would be the economic equivalent of bombing the U.S. credit market. Heck, I have a cash-back credit card in my wallet right now with an APR of 19 percent. It’s very possible you have a similar one too. If so, you may want to take note of which 2020 Democratic presidential candidates would quite literally ban it.

In short, enacting price controls on credit card interest rates will result in less credit. If financial institutions are unable to adequately price risk to ensure their own profitability, they will be forced to reduce the availability of their products to consumers. This could manifest itself in the outright elimination of certain credit cards — possibly including my own — or by dramatically raising the standards on which borrowers are creditworthy enough to receive such a card. This means that consumers would be priced out of credit markets.

On this point, Sen. Sanders and Rep. Ocasio-Cortez actually agree with me — that is why their proposal calls for a new lender for those who lose access to credit: the Post Office.

Read more at the National Pulse. 

Photo Credit: Matt A.J

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