Unless you live in a state that has laws and regulations that are very friendly to credit card companies, you are not likely to have a local credit card company. All states have usury laws that limit how much interest a credit card company can charge, but some have higher limits than others do. It does not matter which state you live in; the laws that apply are the laws of the state in which the credit card company is based.
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Sometimes you may have a local bank or credit union offer a credit card. While the main office of the financial institution is local, the credit card handling will still be likely to go through a more credit-friendly state. Even if the issuing bank is a block away, your statement will probably still say Wilmington, Delaware or the name of some other location with usury laws that are more lax. Credit card companies will avoid setting up operations in states with laws capping credit card interest rates.
What are the usury laws that credit card companies try to take advantage of?
Usury laws set a limit on how much interest can be charged on lending of any kind, including credit card lending. Some states have limits as low as 5%, but others have limits as high as 24%. In general, usurious credit card companies will obviously try to find the states that allow them to charge the highest interest and set up shop there.
Often states will have usury laws that have some flexibility. For instance, Delaware allows companies to charge 5% above the Federal Reserve Discount Rate, so there is no real cap on how high the rate can go. To learn more about the Federal Reserve Discount Rate, visit the Federal Reserve website.
Many states have multi-tiered usury laws. Georgia, for instance, allows companies to charge up to 16% on loans or credit card balances up to $3,000. On balances over $3,000, credit card and loan companies can only charge 5% in Georgia. In addition, on loan balances less than $250,000 in Georgia, the interest must be simple interest; compound interest is not permitted.
Which states have the most favorable laws for credit card companies?
Delaware is favorable to credit card companies because there is no interest limit—it is adjustable. There are a few other states with rate limits like this that base their limit on Federal Reserve rates, bond rates, or other markers that theoretically have no ceiling. These states include:
- North Carolina
- North Dakota
- Rhode Island
The District of Columbia and Tennessee have a robust limit of 24% while Indiana and Massachusetts have limits of 21 and 20%, respectively. The states of Nevada, New Hampshire New Mexico, South Carolina, and Utah actually have no limit whatsoever described in usury laws.
It’s important to note that tax laws also affect a credit card company’s decision on where to set up operations, which is why they are not all in the states with no interest limits at all.
If I have a complaint about a credit card, can I speak to someone face-to-face?
If the issuing bank of the credit card has a local branch office, you can go in there and complain about any issues related to the credit card. In many cases, the branch office can resolve your issues, but in others, the best that they will be able to do is forward your credit card complaints on to the main office. The advantage of seeing someone face to face if you have a complaint is that you can bring in cancelled checks, credit card statements,
and other supporting documentation.
If there is no local branch office for your credit card, you will either have to go to wherever their nearest office is or settle your differences through the phone, mail, and Internet.
Which credit cards are the most popular?
As of 2010, Visa was the leader in terms of total cards in circulation with 269 million. MasterCard was next with 171 million cards. American Express and Discover trailed behind with less than 50 million cards each.
According to J.D. Power and Associates, the two highest rated credit card issuers in 2011 in terms of customer satisfaction were American Express and Discover, with American Express winning the award for best overall. Chase and Capital One also rated very highly.
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