Consider who writes the laws regarding the legal amount of interest that can be charged a consumer. And consider who has the clout to get favorable statutes on the books. Congress and banks. It could be argued (and most convincingly) that the law is actually set up to "rip off" consumers as regards interest rates, not protect them. Especially on credit cards. The lobby for the credit card industry - the banks - insures (has insured - it's a fact) that congress sets down the most favorable allowances for their business. The cards have variable interest rates built in. Make one miscue and you'll be made to pay dearly for it. The card companies even have fine print that forces the consumer with a complaint into arbitration rather than allowing a hearing in open court. Who arbitrates? Private arbitration companies. The "arbiters" do (a fantastic!!!!) repeat business with the credit card companies, and a "one-time" transaction with a complaining consumer. Who gets served? Individuals who have had their cards used fraudulently have found no protection in arbitration (even with overwhelming evidence to support their case) and have had to pay. The "regulations" governing banks are modestly well considered, except as regards the issue with credit cards. Straight up, it's legalized usury. And we continue to subscribe to it daily. If ever a consumer issue demanded action, this is it. As an aside, we are, in general, a country of debtors. And poorer people tend to live in greater fear of government and "the establishment" and are more easily governed (read "controlled") by those in power. This is a fact know to politicians and strategic planners as well as to thinking people who consider the complex nature of a society and the dynamics of its action and reaction. Any issue of power is unequivocally tied to the issue of wealth, of money. It's an (over)established fact. And any citizen on the street will give that an "amen". The consumer can expect almost no protection whatsoever from the law in regards to credit card interest. About the only method of fighting back is to carry minimal or no balances on plastic money. Oh, you could always write your congressman. Like that's gonna help....
High interest rates increase the cost of taking out a loan, making credit purchases more expensive.
Mortgage interest ratesMortgage interest rates.
Mortgage interest ratesMortgage interest rates.
Having low interest rates means the money supply in the economy is increased, thereby allowin people to spend more which thus should have the impact of increasing demand.
Intuition suggests that business activity increases the demand for money, which drives up the "price" (interest rates) of money. It also suggests that lenders will charge more interest in order to cover the losses they experience from inflation (see the Fisher Equation) Along with that, we also experience an increase in inflation. This may not be your question, though, so keep reading. During economic downturns, the Fed lowers interest rates. This causes inflation to rise, because it puts more money in the hands of consumers. When inflation gets too high, the Fed wants to raise interest rates. The previous two paragraphs refer to different "interest rates". The first is about banks lending to consumers, the second is about Fed policy. Please be wary of the difference.
Usury laws are designed to protect consumers from excessive interest rates on loans and other types of credit. Whether your contract allows for payments over time or simply includes a late fee for overdue payments, usury laws determine the maximum amount of interest you can charge.
credit card interests rates are communicated effectively to consumers
High interest rates increase the cost of taking out a loan, making credit purchases more expensive.
Mortgage interest ratesMortgage interest rates.
Higher interest rate means that bank has to pay more to borrow money to fund loans. Bank pass the cost of borrow in the form of higher interest rates to consumers and business loans.thus the increase in higher interest rates increases the cost of borrow which consumers and business enterprises has to pay to get a loan.
Mortgage interest ratesMortgage interest rates.
Mortgage interest ratesMortgage interest rates.
if interest rates are high, consumers stop purchasing little or no products, and that makes the real GDP start to fall, which is a contraction
If people don't agree with the interest rate, they do not have to accept the loan.
that consumers want to borrow money to invest
Purchase principal only (PO) strips that decline in value whenever interest rates rise.
Having low interest rates means the money supply in the economy is increased, thereby allowin people to spend more which thus should have the impact of increasing demand.