How We Got 20% Credit Card Rates and Why You Should Care
How We Forgot an Old Wisdom Found in All Major Religions
🏛️ A Return to Usury
In 2025, credit card APRs routinely hover between 20% and 30%. Meanwhile, personal loans, car loans, and mortgages all operate at far lower rates. So why are credit cards still stuck in the stratosphere?
The short answer: because they can be.
✝️📖 The Moral Origins of Usury Laws
Before usury was an economic debate, it was a moral one. Christian, Jewish, and Islamic traditions all strongly condemned excessive interest.
These ancient prohibitions weren't blanket bans on all lending. They specifically targeted personal loans to people in desperate circumstances — money for food, shelter, medical care, or survival during crisis. Commercial lending for productive business ventures was often treated differently. The moral line was clear: you don't profit from your neighbor's desperation.
"If you lend money to one of my people among you who is needy, do not be like a moneylender; charge him no interest."
— Exodus 22:25"Do not charge a fellow Israelite interest, whether on money or food or anything else that may earn interest."
— Deuteronomy 23:19"Lend, expecting nothing in return."
— Luke 6:35"Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan."
— Quran 2:275
For centuries, these principles guided financial laws across civilizations. Interest wasn't evil — but charging the vulnerable more because you could was. Usury caps were the civilized boundary between credit and exploitation.
Other religions and philosophers reached the same conclusion. Buddhism condemned usury as violating "Right Livelihood." Even Adam Smith — the supposed patron saint of free markets — warned specifically against businesses that profit from others' misfortune.
Every major civilization independently discovered that exploitative interest rates destroy societies.
💸 The Mathematics of Exploitation
Here's what "paying double" actually looks like when you can't pay off credit cards immediately:
The "Effective Tax Rate" on Purchases
When you carry a credit card balance making minimum payments, you're not just paying interest — you're paying an invisible tax on everything you buy:
$1,000 purchase at 24% APR (average rate):
Making only minimum payments (typically 1-2% of balance): $2,050 total cost
Effective "tax rate": 105%
Time to pay off: 7 years
$1,000 purchase at 29.99% APR (common high rate):
Making only minimum payments: $8,125 total cost
Effective "tax rate": 713%
Time to pay off: 27 years
These calculations assume minimum payments of approximately 1% of the outstanding balance plus interest — a structure deliberately designed to maximize the time you'll be paying.
The Predatory Design
Credit card companies deliberately design minimum payments to maximize the time you'll be paying:
Minimum payments are set artificially low ($25-50 on thousands of debt)
Teaser rates hook you at 0%, then spike to 29.99% when you're trapped
Complex fee structures pile on costs when you're already struggling
Credit limits encourage spending beyond your means
The entire system is engineered to find people who can't pay immediately and trap them in debt spirals that last decades.
🎯 It's Not About "Discipline" — It's About Predation
The credit card industry has successfully convinced us that debt problems are about personal failings. That's victim-blaming on an industrial scale.
This Isn't Just About "The Poor"
37% of Americans can't cover a $400 emergency expense without borrowing. **60% of Americans can't cover a $1,000 emergency expense without borrowing.**¹
We're talking about:
Teachers and nurses who can't afford car repairs
College graduates bridging the gap between student loans and entry-level wages
Skilled tradespeople whose medical insurance doesn't cover emergency surgery
Working families where both parents work full-time but still live paycheck to paycheck
The Sophisticated Exploitation: Teams of PhDs Engineering Financial Traps
This isn't about "personal responsibility" — banks employ teams of PhD behavioral scientists specifically to design psychological traps targeting vulnerable consumers.
The Academic Manipulation Machine:
Behavioral science managers with PhDs research how payment methods affect spending psychology and personal finance management²
MIT-level research shows credit cards activate brain reward centers and create neurobiological conditioning that makes people more susceptible to spending cues³
Systematic screening algorithms analyze over 1.3 million credit card offers to identify and target less-educated customers with deliberately back-loaded fee structures⁴
Deliberate Psychological Engineering:
Font size and placement manipulation — worse terms appear in small print on back pages while attractive features get large, colorful front-page treatment
Menu-based contract design to screen between "naive" and sophisticated customers along unobservable psychological dimensions
Reward conditioning systems that exploit the same neurological reward pathways that drive compulsive behaviors
This is industrial-scale psychological warfare conducted by people with advanced degrees who understand exactly how to exploit human cognitive weaknesses. When banks blame individuals for "poor financial decisions," they're victim-blaming people who fell into carefully engineered psychological traps designed by teams of PhDs.
🕰️ When 10% Was Considered Outrageous
For most of U.S. history, state usury caps limited interest rates to 6–10%. These laws weren't controversial. They were considered basic consumer protection.
That changed in 1978, when the Supreme Court ruled in Marquette National Bank v. First of Omaha. This obscure banking case created the loophole that destroyed consumer protection nationwide.
The Marquette Loophole: How One Case Broke Everything
The case involved a Nebraska customer suing a Minnesota bank for charging 18% interest when Nebraska's usury cap was 12%. The Supreme Court ruled that national banks could charge the interest rates allowed in their home state to customers anywhere in the country.
This created a "race to the bottom":
South Dakota and Delaware immediately eliminated their usury caps to attract bank headquarters
Major banks relocated their credit card operations to these states within months
State consumer protections became meaningless overnight
Interest rates skyrocketed from the low teens to 20%+ within a few years
Of course, Congress could have immediately made federal usury laws but chose not to. I wonder why?
🧠 Risk-Based Pricing Doesn't Require Usury
Yes, different borrowers pose different levels of risk. But we can still have ethical pricing tiers — not open-ended, 30% APR traps.
Credit card charge-off rates are currently around 4.6% annually,⁵ and banks have sophisticated algorithms to predict who won't pay. They know exactly which customers are high-risk before they lend to them.
Borrower Profile Fair APR Range Strong credit, steady income 6%–8% Moderate credit, some debt 9%–12% Thin file, low income 13%–15% Chronic delinquency 16%–18% (or denied)
Risk can be accounted for without removing guardrails.
The industry can generate as many counter-arguments as you can imagine, and none of them reflect any science beyond protecting their excessive profits.
📜 What We Can Do Now
If there is a will, there is a way. This is not a complex problem to solve. Actuaries routinely calculate fair pricing that accounts for risk while ensuring reasonable profits - the same formulas used for auto insurance, life insurance, and mortgages.
Banks are entitled to make a reasonable profit, but this is not what is going on now.
These predatory schemes that trap people in debt prison for decades need to be eliminated.
Among other things, this includes not giving people credit limits that are inappropriate for them.
🤐 The Great Moral Silence: Where Are the Sermons?
Any religious group that claims to follow biblical teachings should be mobilizing against 25% credit card rates, but they're not. Whether it's:
Religious right evangelicals with their massive political machine
Catholic parishioners who could pressure their representatives
Mainline Protestant churches with social justice missions
Any faith community that takes scripture seriously
None of them are making this a priority.
These are things that help make a better life for at least 60% of their members.
🏛️ Where Are You, Members of Congress?
And where exactly are our elected representatives while teams of PhD behavioral scientists systematically exploit American families?
It could have been much better even before 1978, but after the Supreme Court's Marquette ruling destroyed state consumer protections overnight, the system became completely broken. Congress could have immediately passed federal usury laws to close that loophole, but neither party has lifted a finger to fix this for nearly half a century.
What does the average American mean to them: a vote to help get them elected or someone that they work for?
Sources:
¹ Federal Reserve Board, "Report on the Economic Well-Being of U.S. Households in 2023" ($400); Bankrate Emergency Savings Report 2025 ($1,000)
² Merle van den Akker, Behavioral Science Manager, Commonwealth Bank Australia; PhD Behavioral Science, Warwick Business School
³ Drazen Prelec, MIT Sloan School of Management, "Neural mechanisms of credit card spending," Scientific Reports, 2021
⁴ Hong Ru & Antoinette Schoar, "Do Credit Card Companies Screen for Behavioral Biases?" NBER Working Paper, 2016
⁵ Federal Reserve Bank of St. Louis, Credit Card Charge-Off Rate data, 2024