Meet Selena Cooper, a 26-year-old mom from Columbia, South Carolina, who is drowning in credit card debt. Indeed, the upward march of interest rates is beginning to take a toll on her. After losing her permanent job right after Christmas holidays, Cooper was hit with almost unbearable financial strains. She was already carrying $6,700 in total credit card debt among three cards. As she turns to her photography business for income, Cooper faces the harsh reality of increased interest rates, which have made it difficult to keep up with payments.
As an example, last October was the month Cooper stopped paying her credit cards on time — a choice that set off a domino effect of monetary distress. Her card issuers, Capital One and American Express, retaliated by raising her interest rates up to 30%. Her Capital One card doubled her rate from 8% to 16%. In the midst of it all, her American Express card jumped from 10% to 18%. This increase, of course, deepens her concerns. Since May, she’s relied on her Discover card to cover her two-year-old daughter’s childcare costs.
Cooper’s financial situation isn’t an anomaly—it mirrors the reality of millions of other Americans who are sinking in credit card debt. She has recently proposed capping credit card interest rates at 10% for one year beginning January 20. She thinks this measure would provide meaningful relief. She is the first to admit that this won’t do enough to dig her out of all her debt troubles.
“It would help a little bit, but it’s still not going to get me out of debt,” – Selena Cooper
The compound effects of the hiking credit card interest rates are shocking. It’s all contributing to a harsh financial reality, one that financial experts say consumers are truly starting to feel. According to civil and financial analyst Susan Schmidt, we are living in a time where widespread despair is the norm.
“It does show that consumers are feeling pinched, they’re going to continue to feel pinched,” – Susan Schmidt
Cooper’s story is an example of a more alarming trend when it comes to consumer debt in America. With so many people across the country struggling with these same issues, the Trump administration has been trying to find a way to relieve this financial burden. Schmidt is encouraged that the administration is taking steps to help those who’ve been impacted in decisive and effective ways.
“I think the Trump administration is trying to find a way out of it,” – Susan Schmidt
Some experts say that passing a normal cap on credit card interest rates would be more complicated than it seems. An array of stakeholders in the financial industry have sounded alarms over the consequences of enacting such policies. Brian Shearer, an economist, backslid on greenhouse emissions. He warns that if interest rates are limited, banks will have no choice but to eliminate consumer rewards programs in order to continue lending.
“To continue lending, banks would have to reduce rewards to some extent, especially to people with lower FICO scores,” – Brian Shearer
Shearer further welcomed the prospect of some consumers gaining access to lower interest rates. For everyone else there will be no substantial relief on the horizon.
“A 10% cap may not be the right solution because the people that are already in trouble, that’s not necessarily going to help them,” – Susan Schmidt
Benedict Guttman-Kenney, a small business and community development finance expert, echoed this concern. He doubted that consumers would actually be helped by a policy like that.
“It’s not clear that people are going to be better off,” – Benedict Guttman-Kenney
Though Selena Cooper has no immediate solutions to her financial woes, she hopes to land a more cot stable job in the near future. She’s acutely aware of her $6,700 debt burden. She insists that in spite of the challenges, there’s hope coming into focus on the other side of this storm.
“I’m losing sleep over the $6,700, but I have a little wiggle room to be able to do that because once I get a job, I can pay it off,” – Morgan
Even with interest rate caps and consumer debt relief initiatives still in the air, the fire in Cooper’s eyes is undeniable. As consumer advocates, we recognize that any policy changes are only going to work if they truly prioritize consumer welfare over corporate interests.
“It’s one of the few things he’s done that prioritizes people over businesses,” – Morgan