PBS: Secret history of the credit card
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Re: PBS: Secret history of the credit card
#2Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future - experimental economists found this, but I can not retrieve references right now, my googlefoo is failing. This is a textbook case for regulation. A similar case is car insurance : your (irrational) choice is to not buy it. However, as this increases the cost on society, and (I think) on yourself in the long term, regulation is imposed - in the form of compulsory insurance.
Re: PBS: Secret history of the credit card
#3Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future - experimental economists found this, but I can not retrieve references right now, my googlefoo is failing. This is a textbook case for regulation. A similar case is car insurance : your (irrational) choice is to not buy it. However,…
Except, when you get credit cards, you get screwed. When you don't get insurance, everyone else is screwed. That's why credit cards are a classical case for information, not regulation. It's a sad sad slope that regulation is incresingly used to protect people from themselves, rather than each other.
Re: PBS: Secret history of the credit card
#4Mr. Kahr, for one, makes no apologies. "If someone is riskier, he should be paying a higher rate,'' he said. "It's more economically sound. It's fairer for riskier people to pay a higher interest rate, higher fees, whatever it is, than less risky people.
Interesting. What he is really saying is 'what's fair got to do with it? Free markets dissolve the concept.
"If there was a demand for a credit card product that never changed its terms and rates and stuck with the customer no matter what, I'd be running around telling people 'Let's market this wonderful fairness card,'" he said.
"You know -- 'transparency card,' 'rock solid card' -- whatever it may be. I don't believe that that would succeed."
Re: PBS: Secret history of the credit card
#5Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future - experimental economists found this, but I can not retrieve references right now, my googlefoo is failing. This is a textbook case for regulation. A similar case is car insurance : your (irrational) choice is to not buy it. However,…
Except, when you get credit cards, you get screwed. When you don't get insurance, everyone else is screwed. That's why credit cards are a classical case for information, not regulation. It's a sad sad slope that regulation is incresingly used to protect people from themselves, rather than each other.
Wouldn't you agree though that if enough people screw themselves, people who haven't screwed themselves start getting screwed, too?
Re: PBS: Secret history of the credit card
#6Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future - experimental economists found this, but I can not retrieve references right now, my googlefoo is failing. This is a textbook case for regulation. A similar case is car insurance : your (irrational) choice is to not buy it. However,…
Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future
How do you assess that except on a case-by-case basis?
Re: PBS: Secret history of the credit card
#7Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future - experimental economists found this, but I can not retrieve references right now, my googlefoo is failing. This is a textbook case for regulation. A similar case is car insurance : your (irrational) choice is to not buy it. However,…
Except, when you get credit cards, you get screwed. When you don't get insurance, everyone else is screwed. That's why credit cards are a classical case for information, not regulation. It's a sad sad slope that regulation is incresingly used to protect people from themselves, rather than each other.
It's true. That's an important distinction.
But apart from 'information' requirements like those imposed on tobacco in many places (advertising bans, warning labels, mass propoganda campaigns) I don't think any more information would help. If you go that path, you may as well regulate.
What would happen if all regulations beyond basic information availability requirements were lifted? If you could sell people whatever they would buy? We know what happens in lower risk, higher value credit.
The effect of large scale defaults is a flavour of everyone else is screwed.
Re: PBS: Secret history of the credit card
#8Credit cards are exploiting holes in our rationality: classical, well known rational choice failures like irrationally valuing x dollars now more than 2x dollars some time in the future - experimental economists found this, but I can not retrieve references right now, my googlefoo is failing. This is a textbook case for regulation. A similar case is car insurance : your (irrational) choice is to not buy it. However,…
Except, when you get credit cards, you get screwed. When you don't get insurance, everyone else is screwed. That's why credit cards are a classical case for information, not regulation. It's a sad sad slope that regulation is incresingly used to protect people from themselves, rather than each other.
What other product can you purchase, and have the price change after you purchase the product?
What other form of loans/credit can you purchase and then have the interest rate changed without your knowledge and without informing you because of a missed or late payment on a different loan?
What other form of loan can increase your interest rate (cost) based on an increase in the balances on accounts with completely different companies?
I've meet well educated Md's and people with Master's degrees who've gotten screwed by credit card companies. It's not a matter of education, IMHO. It's a matter of deceptive business practices that people don't really get wise to until they've gotten burned badly. Have you ever tried to read through a credit card agreement? I'm a well educated man, and I can't make heads or tails of those agreements.
I'm sorry, but even an industry needed regulation, its the credit card industry.
Re: PBS: Secret history of the credit card
#9Mr. Kahr, for one, makes no apologies. "If someone is riskier, he should be paying a higher rate,'' he said. "It's more economically sound. It's fairer for riskier people to pay a higher interest rate, higher fees, whatever it is, than less risky people. Interesting. What he is really saying is 'what's fair got to do with it? Free markets dissolve the concept. "If there was a demand for a credit card product that nev…
"Free markets dissolve the concept [of fairness]."
Some would say that free markets implement the concept of fairness. Of course, there are no free markets in the world today, to a first approximation, since all the prices and outcomes are distorted by external agencies, so whether free markets are fair is a bit academic.
Re: PBS: Secret history of the credit card
#10Earlier quoted context omitted.
Except, when you get credit cards, you get screwed. When you don't get insurance, everyone else is screwed. That's why credit cards are a classical case for information, not regulation. It's a sad sad slope that regulation is incresingly used to protect people from themselves, rather than each other.
What other product can you purchase, and have the price change after you purchase the product? What other form of loans/credit can you purchase and then have the interest rate changed without your knowledge and without informing you because of a missed or late payment on a different loan? What other form of loan can increase your interest rate (cost) based on an increase in the balances on accounts with completely di…
The price is not changing after the fact - you agreed to all the rates and changes before you start.
If they want to change those in any other way then they have to contact you and you have the option to stop using the card and pay off the balance at the old rate.
The agreements are not that complicated - people simply don't read. I see it happen all the time with website UI's - the instructions are right there and people never read them.
You don't need to read the full agreement - everything you need to know about the rates is on the back of the application - in a format set by congress. How much more regulation do you need?
Edit: apparently there is more regulation coming: http://www.ft.com/cms/s/0/d70973f2-ca0f-11dd-93e5-000077b076...