Nick Wolney
speaker
54 appearances
1 recordings
1 series
first heard Dec 2024
last heard Dec 2024
Nick Wolney’s voice in public audio — every appearance, attributed to the second.
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And so we kind of have this culture that, I mean, not even just culture, it's just in terms of how people buy a house, how people buy a car, your credit score, it's very much your financial rating, you know, it's your track record. And so it's kind of difficult for us to divorce ourselves from credit card culture because of that.
Well, and last year I spoke to a financial educator who teaches classes in high schools, teaches financial literacy classes in high schools. And something she pointed out, she said this happens in every single class. Kids will – well, they won't raise their hand in the class. They'll come up to her afterwards, you know. And they'll say, you know, my parents gave me this credit card.
And it's just – It feels like it's just like free money, you know, and it's like, oh, you know, so the parent, it feels like they're doing a good job in terms of opening up a credit card and helping their child with their credit history. But for many of those kids, they don't understand why they have the credit card and they don't understand how to use it.
And, you know, I would assert that young people are perhaps more impulsive, you know, at times as they start to come into adulthood and things like that. And so just having that financial literacy piece in place, you know, is really, really important.
there was and it did ease some of the burden uh but you know when you're 100 feet down the rabbit hole and you get a law that gets passed and you know you come 10 feet back up you're still quite far down the rabbit hole the card act credit card accountability responsibility and disclosure that was in 2009 statements will be required to tell credit card holders how long it will take to pay off a balance
It limited excessive marketing to young adults. There was a lot of marketing towards college students who might be more susceptible to getting a credit card before they have a fully robust financial education, financial literacy. So it did make a little bit of a dent, but unfortunately, we're dealing with quite a large boulder here. And so there's more work to be done, certainly.
Regulations have loosened on credit card interest rates, and there are a few reasons why. So some history here. There was a Supreme Court opinion that came out in 1978, Marquette National Bank versus First of Omaha Corp. And this opinion allowed national banks to be governed by the usury laws of the state that they are headquartered.
And so famously in the late 70s, Citibank was just absolutely drowning. Inflation was extremely high circa 1980. It was actually so high that banks like Citibank were losing money on every single dollar that was on a credit card because they were capped on how much interest they could charge their consumers.
So Citibank famously courted the governor of South Dakota and said, hey, we'd love to move our headquarters to South Dakota. Will your legislature invite us to come to South Dakota? And they agreed. So they abolished the usury laws in South Dakota. Citibank moved there. Several other banks moved there. Delaware followed. Nevada followed.
And so as a result, no matter what state you live in, if you have a credit card from that bank and that bank is headquartered in Delaware or South Dakota, that bank can charge whatever it wants to on the credit card. And as a result, you have this very deregulated landscape that allows national banks to jack up those credit card rates.
Of course. What else is it for, right? All the way back in the 1950s, those very first credit cards that came out, there was a card called Diner's Club, which was one of the first forms of a credit card.
And it was very much branded as this social club card, right? You could go out, you'd be in the Diners Club and things like that. And it was branded very much as an identity. That was also akin to just a lot of the marketing and branding in general in the 1950s.
You know you made it when your cards go from sounding like this to sounding like this. Or you see this as a trend on TikTok now. Gen Zers showing off their Amexes as a flex.
Right? That's what I thought. Like, don't flash your platinum Amex to me. And so that's kind of interesting for them as well. It's like the social clout of having the platinum Amex is worth the $695 annual fee. to that. But if you look at the total credit card debt in America, it's just gone up and up and up and up and up. We had two corrections.
We had a correction in the housing crisis, and then we also had a correction during COVID where people were like, oh crap, I better pay this down in case I lose my job. And so we did see corrections there, but otherwise we have seen that number steadily go up. Another reason we're trying to sound the alarm now is that people are really struggling right now
Historically in Q1 of each year, we see a little bit of a payoff. People come off the holidays. They're like, oh God, what have I done? And they're actually responsible. There's some of that new year's resolution energy as well. People tend to pay down some of the balance. So we usually see a dimple in that line graph.
And for the last two years, so Q1 of 2023 and this Q1 as well, people didn't really do that. So even most recently, we went from $1.13 trillion to $1.12 trillion. And this is the quarter where people are supposed to be really making a dent and paying down their balances.
So it's concerning to some economists that people are not following that usual behavior, that people are actually needing their credit card in order to make ends meet.
And there's also some concern that in terms of consumer spending, which accounts for a large part of overall GDP, that that is perhaps being propped up somewhat by people using their credit cards and spending money that they don't necessarily have.
Yeah, I mean, it's happened multiple times. It tends to die in legislation or when it gets to a certain House committee or a Senate committee. We have a couple of different ones that have been introduced over the years. The most recent one is the Capping Credit Card Interest Rates Act.
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