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Speaker 1: Let's say good morning to the host of How to

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Speaker 1: Money on KFI. It's our friend Joel Larsgard.

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Speaker 2: Morning, Joel, morning Amy.

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Speaker 1: Okay, so the first subject we're going to talk about

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Speaker 1: today is credit card interest rates. And I just heard

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Speaker 1: about this that President Trump was talking about putting a

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Speaker 1: ten percent cap on credit cards. And you say, that's

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Speaker 1: not a great idea.

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Speaker 2: Yeah, it's not.

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Speaker 1: It sounds like a good idea, it does, doesn't. The

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Speaker 1: rates are stupid high right now. They're like twenty two

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Speaker 1: to twenty five percent.

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Speaker 2: Yeah, oh yeah, And that's been one of those things.

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Speaker 2: The post pandemic reality of rising interest rates means anybody

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Speaker 2: with credit card debt has seen that interest rate rise.

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Speaker 2: And if you have a recurring balance, you're you're talking

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Speaker 2: about paying more money every month. That's just going towards interest,

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Speaker 2: it's not paying down the balance. And that's a really

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Speaker 2: frustrating place to be. And the truth is, yeah, like

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Speaker 2: an interst rate reduction for those folks from something like

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Speaker 2: twenty four to twenty five percent down to ten percent

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Speaker 2: could be could make a massive difference. We're talking about

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Speaker 2: lowering your minimum monthly payment. We're talking about the ability

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Speaker 2: to make more progress on that credit card debt, and

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Speaker 2: so for those people for a time, because this is supposedly,

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Speaker 2: it's proposed, I mean, this is a legislation by truth

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Speaker 2: Social So will this happen? How will this happen? That's

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Speaker 2: the big that's the big question too. But yeah, those

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Speaker 2: people would see a benefit and something like one hundred

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Speaker 2: billion dollars less a year will be paid in credit

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Speaker 2: card interest. But there are always trade offs to any

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Speaker 2: sort of legislation or any any sort of proposal like this,

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Speaker 2: and some of them aren't bad. Like I think one

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Speaker 2: of the things that a lot of people, myself included,

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Speaker 2: would be harmed by is credit card rewards would become

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Speaker 2: more meager. That's definitely one of the things. Because credit

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Speaker 2: card banks, the banks who issue the credit cards aren't

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Speaker 2: going to be like, oh, well, you know what, we're

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Speaker 2: we're making far less money in interest. I guess we'll

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Speaker 2: just take it on the chin. They're going to find

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Speaker 2: other ways to reduce the payouts on credit cards to

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Speaker 2: companies or to customers who have been loyal. I don't

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Speaker 2: mind that, because right now there's a big disparity the

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Speaker 2: haves and the haves nots in the credit card game.

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Speaker 2: I wouldn't be mad about that. I think maybe the

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Speaker 2: most harmful part of this proposal though, is it can

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Speaker 2: actually harm the people that it's seeking to help. So

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Speaker 2: when you think about people with bad credit scores who

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Speaker 2: need access, let's say, to credit cards, they might find

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Speaker 2: that they are with a credit card interest rate cap

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Speaker 2: of ten percent, completely barred from from getting credit cards

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Speaker 2: because the bank says, well, yeah, we'd be willing to

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Speaker 2: take the risk at a potential interust rate of twenty percent,

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Speaker 2: but not at a potential interstrate of ten percent.

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Speaker 1: And do we know if there's any kind of well,

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Speaker 1: we don't like you said, he made the statement on

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Speaker 1: true social but didn't put the fine print on there.

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Speaker 1: But maybe there will be protections.

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Speaker 2: And maybe and maybe, I mean, like that's the question,

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Speaker 2: Like the devil's in the details, right, and so how

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Speaker 2: does this come about? Does this through a piece of

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Speaker 2: legislation through Congress or and yeah, what do the details

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Speaker 2: look like? Is a temporary reprieve and the government is

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Speaker 2: funneling money to the banks to make up for the

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Speaker 2: lost revenue. I mean, there's so many details that we

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Speaker 2: don't know about. But if you're just talking about some

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Speaker 2: sort of federal mandate to cap interest rates on credit cards.

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Speaker 2: It's it's we're just seeing more government involvement in some

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Speaker 2: places where it just doesn't belong or it's not beneficial.

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Speaker 2: And I get too a lot of people would be like, Hey,

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Speaker 2: this feels like a predatory system, or it feels like

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Speaker 2: there's so many people in credit card debt and they

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Speaker 2: can't they can't get out of it. They're having a

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Speaker 2: really tough time. I will say, there are places for

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Speaker 2: you to turn if you're in one. You're in a

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Speaker 2: position like that, there are nonprofits out there. There are

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Speaker 2: for profit companies too. You want to avoid those, but

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Speaker 2: there are nonprofit companies out there who will help you,

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Speaker 2: who will work with the banks to help you lower

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Speaker 2: your interest rates. So like Money Management International or the

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Speaker 2: National Foundation for Credit Council. Those are two places you

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Speaker 2: can turn and you can actually get help. But I

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Speaker 2: don't love necessarily this sort of proposal. I don't know

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Speaker 2: that it's going to pan out the way the President

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Speaker 2: or maybe people in his orbit think it will.

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Speaker 1: Okay, No, I have a question about a credit card

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Speaker 1: for you, because I was just talking about that. I've

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Speaker 1: got a sick cat, and so I've got this stupid

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Speaker 1: huge balance that I can't pay off this month. So

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Speaker 1: I need a plan because I've been trying to be

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Speaker 1: really good and pay off every month, but I'm not

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Speaker 1: going to do it this month, and so now I'm

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Speaker 1: gonna get charge that credit the interest rate and there's

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Speaker 1: nothing you can do about it.

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Speaker 2: Yeah. Well, so that's the whole I love that you

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Speaker 2: said I need a plan, and the truth is, it

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Speaker 2: happens right. This is why the emergency fund is so crucial.

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Speaker 2: And we start with the essentially thirty five hundred dollars

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Speaker 2: emergency fund that covers all the basics, and then growing

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Speaker 2: it from there to something like three, maybe even six

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Speaker 2: months worth of monthly expenses in your save music account

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Speaker 2: so you can handle something like that and then build

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Speaker 2: it back up after the fact. But until you get

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Speaker 2: to that point, yeah, you might need to put it

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Speaker 2: on a credit card sadly and not be able to

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Speaker 2: pay it off in full in that moment. And it

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Speaker 2: is crucial, I would say to even consider you and

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Speaker 2: I have talked about this before. I mean the bear

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Speaker 2: bones budget, dialing back spending in other areas at least

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Speaker 2: for a time being, because credit card debt is so painful,

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Speaker 2: and you do not want it to turn into a

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Speaker 2: recurring cycle. So creating, coming up with a plan. There

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Speaker 2: are tools out there on the internet that can even

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Speaker 2: help you with that to make sure that that credit

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Speaker 2: card debt is eliminated soon. You just don't want to

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Speaker 2: become accustomed to it, to become okay with it, because

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Speaker 2: when you do that, that's when your finances can can

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Speaker 2: really spiral. Because credit card debt is such a pain

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Speaker 2: point for so many people. It's awful and it needs

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Speaker 2: to be avoided at all costs.

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Speaker 1: Yeah, and then I even looked at this statement. Well,

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Speaker 1: of course I looked at the statement, but it says,

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Speaker 1: you know, the minimum payment due is forty five dollars.

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Speaker 1: I'm like, yeah, I've got like five thousand dollars on

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Speaker 1: that credit card right now, and that they even allow

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Speaker 1: a forty five dollars payment. I was like, I would

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Speaker 1: just perpetually forever be in debt if I didn't pay

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Speaker 1: that off. It's crazy if you run when.

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Speaker 2: You look at them, I mean, on that statement, it

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Speaker 2: will also tell you, right, if you pay the minimum,

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Speaker 2: this is how many years you'll remain in debt, and

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Speaker 2: for most people it's decades. Right, even for like a

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Speaker 2: five one thousand dollars balance, it's like, oh, forty five

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Speaker 2: dollars a month. Oh, I guess I'll be in debt

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Speaker 2: for the next twenty two years. And that idea of

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Speaker 2: having that hanging over your head, that paying the minimums

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Speaker 2: is just completely insufficient unless you're doing something like the

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Speaker 2: debt snowball approach right where you're paying down one debt

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Speaker 2: vociferously with all your effort, all your might, and then

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Speaker 2: on the other debts you're paying the minimums, yes, for

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Speaker 2: a little bit of time, until you eliminate that one debt,

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Speaker 2: and then you move on to the next one, but.

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Speaker 1: You want to everything on the next one. Yeah, exactly,

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Speaker 1: all right, But such great advice as always, And we

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Speaker 1: didn't get to our other topics, but we can save

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Speaker 1: them for another day because I want to talk to

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Speaker 1: you about those things too, Because we were going to

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Speaker 1: talk about why kids are going with debit cards instead

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Speaker 1: of credit cards. And again, sounds like a good idea

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Speaker 1: because then they're not actually accumulating debt, they're using the

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Speaker 1: money they have. But there's there's the downside to it too,

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Speaker 1: and so let's talk about that next week.

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Speaker 2: Sounds good, awesome.

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Speaker 1: The host of How the Money on KFI, Joel Larsgard,

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Speaker 1: and for more great financial advice. You can listen to

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Speaker 1: them every Sunday from noon to two. It's called how

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Speaker 1: to Money right here on KFI.

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Speaker 2: Thanks Joel, Thanks Amy,