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Credit Card Companies are Chartered in States with No Usury Laws.

This map shows the top 10 credit card issuers and their state of charter. Notice anything? No surprise here: they are all located in states with weak or no "usury laws," meaning there is no cap on interest rate that is charged!

These clusters were largely formed by a 1978 Supreme Court decision (Marquette National Bank v. First of Omaha Service Corp.) that determined national banks only have to obey the interest-rate caps of the state they are chartered in, not that of the state where a bank’s customer lives. This means that when a bank from a state without limits on interest, like Delaware, issues credit cards to people living in states like Minnesota, which caps credit card interest at 18 percent, the customer can be charged any rate of interest.

Link (from the PBS Frontline’s neat story on The Secret History of the Credit Card)

Posted on Monday, September 11th, 2006 at 1:01 am
Category: Credit Card. Feed: RSS 2.0

One Comment to “Credit Card Companies are Chartered in States with No Usury Laws.”

  1. Wheaties for Your Wallet » Blog Archive » Um, Pennylicious? Says:
    September 11th, 2006 at 10:56 pm

    [...] Pennylicious bills itself (no pun intended) as, “Finally, a funny money blog!” And usually, it is. Today, though, they post about the states where credit card companies are chartered, referring to a map from Frontline’s excellent show, Secret History of the Credit Card. The map shows that the credit card companies have chosen states with no or very lenient usury limits, so they can charge very high levels of interest. [...]

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