This is the Cato Daily Podcast for Monday, May 13th, 2024. I'm Caleb Brown.

Some in Congress want to simply cap credit card interest rates.

The results would be predictable, fewer benefits for people who would still qualify for

credit cards, and others who would simply be denied access entirely.

It's a lose lose. It's a lose-lose. Cato's Nick Anthony discusses his new essay in the

forthcoming Cato book The War on Prices. When it comes to credit cards, a lot of people have them, a lot of people have them.

A lot of people have them probably shouldn't have them.

And you pay... a lot of people have them, probably shouldn't have them.

And you pay a price, in a sense, if you carry a balance on a credit card,

over and above whatever you might pay for the privileges of membership as some companies like to advertise.

Well, what's the problem with that, I suppose?

In Congress, what is viewed as the problem with people paying interest on debt on a rolling revolving basis?

Well, it shouldn't be a problem. You're paying for a service, you're asking for something, signing a contract, making an agreement, and you're good to go.

But it's easy if you make a misstep, you have a tragic event to get behind and get in over your head,

and then you write to Congress saying that this isn't fair I don't like this and

members of Congress hear that and they try to act on it they try to shut that down

and try to control what interest rate can be set. What is the allowed range

because they want to stop anyone from falling in that situation?

We ought to understand sort of the business model of credit cards. in that

people who carry a balance model of credit cards and part of that business model is that people who carry a balance

subsidize a lot of the benefits for people who don't, you know, which is it might be airline

miles or cash back or 5% off at some store, whatever the benefit is, the people who are relatively less good

...