Would you believe us if we told you that credit card interest rates in other countries are over 150%?
Rates that are this high is common in countries where the regular credit systems is not well developed. For example; in Brazil where the credit interest rates have averaged over 300%, certain aspects of credit reporting that are taken for granted in the U.S. credit system have not historically been allowed at all. The rules are changing, though, which is commonly expected to bring the high interest rates all the way down.
The point is, with no credit reporting to speak of; the only thing banks and lenders can do to protect themselves in the long run would be to charge outlandish rates. As credit reporting systems are developed and credit reporting practices take hold, the interest rates eventually come down because banks and lenders have a better handle on the RISK associated with a given borrower.
In the United States Of America the credit system is far from perfect. Privacy & consumer protection concerns often lead people to believe that the system as a whole is a big problem. But in reality; without the data collection, tracking, and reporting practices of a functioning credit system, loans and credit would quickly become unbearably expensive.
The reason we can get credit cards with reasonable terms–the reason we can get lines of credit, personal loans, business loans, and more–without breaking the bank, boils down to the fact that we have a fairly efficient and well-functioning credit reporting system at the end of the day. Control your credit - secure your future!