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Generally speaking, usury laws are state laws which specify the maximum interest rate that may be charged by a lender.

Many folks wonder why, if these laws exist, that credit card companies are allowed to charge such exorbitant and excessive interest rates.

This is why:

1. Less than half the states put a cap on interest rates and a vast majority of credit card companies set up shop in these states that have the fewest restrictions or limits on interest rates.

2. These lender-friendly states allow a "sky is the limit" interest rate as long as it's stated in the credit card agreement.

3. In 1978, a U.S. Supreme Court ruling enabled the national banks to charge its credit-card customers the interest rate allowed in the bank's home state even if that rate was higher than the legal limit set by law in the customer's home state.

In any event, the current credit rate paid by approximately one-third of all credit-card holders is 20% or more.

However, despite all the talk about banks and credit card companies gouging consumers with high interest rates, the U.S. Senate defeated a recent bill (May, 2009) to cap rates at 15%.

The bill didn't even come close to passing. It needed 60 votes and only got 33.

- Ed Smith, Publisher
The EHS Letter Manual