why are credit card interest so high?

Question

answers in 300 words with references

Answer 1

Because it is an unsecured form of lending. Secondly they have reasonably long lending cycles at time- 56 days. Credit card companies also are responsible for fraudulent use over £50 unless they can prove you were negligent. Source:my brain.
They also have to deal with defaulters of course."Default charges are those levied by card providers if people are late with a minimum payment, exceed credit limits or make repayments by credit or debit cards that are not honoured
"http://www.timesonline.co.uk/article/0,,2-2120856,00.html
Even if these charges are lowered the credit card companies hold all the aces. See below.

Barclaycard has more than 11 million UK customers in the UK, some of whom will now face paying higher interest rates.

We have to reflect in our pricing the costs we incur in our business

Barclaycard spokesman

From 1 August, when the new lower penalty charge comes in, the interest rate paid by about 10% of its customers will rise by between 2% and 5%, within a range of 14.9% to 29.9%.

Cash advances will now be charged at 27.9%, up from 21.9%.

The bank said that only its most creditworthy customers would pay the lowest rate of 14.9%.
Source BBC news
Their high charges relate somewhat to their costs of course.

Costs
Credit card issuers (banks) have several types of costs:
Interest expenses
Banks generally borrow the money that they then lend to their customers

Operating costs
This is the cost of running the credit card portfolio, including everything from paying the executives who run the company to printing the plastics to mailing the statements to running the computers that keep track of every cardholder's balance to taking the many phone calls which cardholders place to their issuer to tracking down fraud rings to protect the customers. Depending on the issuer, marketing programs are also a significant portion of expenses

Charge offs
Some customers never pay their credit card bill
source wikepedia
There! 300 words for you. :)

Answer 2

All lenders have a simple equation for determining an interest rate and the risk involved in a certain loan increases the rate. Common credit cards' rates are so high because the risk involved in lending cash to citizens without any collateral is very high. Credit card companies never collect a great deal of the debt. Essentially, your credit card interest rate is very high because someone else will not pay their bill.

Answer 3

High interest credit cards are a capitalistic invention. By biblical law,: Exodus 22:25-27 (New International Version) 25 "If you lend money to one of my people among you who is needy, do not be like a moneylender; charge him no interest. [a] 26 If you take your neighbor's cloak as a pledge, return it to him by sunset, 27 because his cloak is the only covering he has for his body. What else will he sleep in? When he cries out to me, I will hear, for I am compassionate.

Answer 4

Because it's a risk for the card companies. They don't always get paid back , some people declare bankruptcy and some just never pay. They also need to turn a profit to stay in business.... So they charge high interest rates.

My sources? Common sense.

Answer 5

Who needs 300 words when one will do. CAPITALISM.

Answer 6

Corporate greed

Answer 7

It's called legal loan sharking. Only solution is don't use them if you can't pay them off every month. And save money, save money, save money!

Answer 8

I would have to charge you £25 plus VAT to answer this.

Answer 9

Because they are instant unsecured loans.

Answer 10

Because lenders are greedy.


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