EDITORIAL: Government, credit cards don’t mix

There has been a change within the world of credit card payments.

The Daily Kent Stater reported Friday that credit card companies are being required by the federal government to raise the minimum monthly payments they demand of their customers.

Credit card companies send their customers monthly bills, which show the amounts their customers have spent with their credit cards and their minimum payments, or lowest monetary amounts customers are required to pay that specific month.

The government is pushing this restriction, which must be implemented by all card issuers by 2006, with the intent of seeing American consumers get out of debt faster. Under guidelines issued by a division of the Treasury Department, minimum payments must be high enough to cover both interest charged by the creditor and at least some of the outstanding balance held by cardholders.

For example, if an individual spends $100 and 10 percent interest accrues on that amount, the credit card company would charge $10 interest in addition to the $100 the person spent because 10 percent of $100 is $10. Before the new restrictions, a card issuer feasibly could charge a minimum payment of just the $10 it charged as its finance fee. Now, it must charge that $10 plus a portion of the $100 the card holder charged.

Thus, instead of permitting credit card companies to decide their own policies, the government has taken an initiative to dictate to the companies what they must charge per month. In some cases, this could mean monthly payments doubled in size. The Daily Kent Stater reported that the average minimum payment required on credit cards in past years was about 2 percent. Now, most industry watchers expect the new monthly amount due to average about 4 percent.

Many individuals who attend college are going to be affected by this change, said Jo Czirok, office manager at Falls Consumer Credit in Akron. She added that, “college kids have a lot of credit cards.”

Seeing as Kent State is a university full of such college students, these new requirements could have a sobering – or devastating – effect on many who own plastic lines of credit and live on fixed, tight incomes.

Aside from the problems the new requirement could pose to credit card customers, this editorial board does not respect the decision the government has made. While, yes, its intentions are good, the government should not simply step in and completely change a company’s policies. Here, it has stepped in and completely changed an industry’s policies.

Typically, the American standard is to allow business to do business. Here, the government is infringing upon that standard.

Put quite frankly, the government needs to back off.

The above editorial is the consensus opinion of the Daily Kent Stater editorial board.