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Ok, I'm gonna show my ignorance here I guess. But this has been rolling around in my head for a long time, and I just don't understand how things got this way.
When you go to purchase a car, you "finance" it. Whatever that's supposed to mean. Anyway, basically you are loaned money by a bank or financial entity. Then you must pay back that loan with a specified amount of interest, within a pre-determined timeframe. This makes complete sense. If I loan my neighbor 500 bucks, and a 10% interest rate with an agreement he'll pay me back in 1 year, then I'll get back 550. Pretty simple, safe, whatever.
Now, taking the car finance idea. If you for some reason cannot pay your bill, the car is going to get repo'd. This can happen all the way up to the final couple of months on your loan. You pretty much could have already paid for ALL the interest, and nearly all of the car, and if you screw up, you lose it all. Now the bank get your car, and can auction it, and you're left with nothing except bad credit and probably a judgment for whatever you owed. Tough luck if it happens, but it's still logical in a sense.
Ok, now for the credit cards. I understand these are usually "unsecured" credit loans. Basically, they provide for you a certain amount of money that's available, with a "pre-determined" interest rate. So let's take an example. You turn 18, been working that job at McDonald's for the past 3 years, and now your'e ready to get your first credit card. Some company is stupid enough to take a chance on you and gives you a $2000 limit.
So you do what pretty much any 18 year old would do. Go shopping! Well, for a while everything is going fine. You're enjoying your "new" stuff, paying what the credit card company told you to pay (let's say 100 per month). A year goes by, and you think to yourself, "Hey self, I've given that company $1200 bucks so far." So you call the company and ask how much the balance is. Let's just say it's about 2750.......still.
I'm gonna stop right there for a minute, so hopefully you can see where I'm going with this. Understandably you should have to pay an interest rate for any loan you take out, otherwise how are the loan companies supposed to make any money? But seriously, how can credit card companies get away with this kind of stuff? Compounding interest rates, insane late fees, ridiculous interest rates, etc. It almost seems criminal (not necessarily in a law sense, but in a "right vs wrong" sense).
In the above example, when the credit limit (loan) was given, then an interest rate based on the person's credit should have been calculated. Let's say it was 20%. So the guy should have been responsible to pay back $2400. And paying for 1 year, his remaining balance (if he didn't use the card anymore) should have been 1200. But that's not how it works, it never does, except in car loans.
My main question is WHY? WHY is this even legal? You want to know why our country is in such bad shape right now? I feel this kind of stuff is a big contributer.