Leviticus 35:36 says that a Jew that loans money or gives food to a poor neighbor must not charge interest or usuary. Other Old Testament readings say that a Jew must not charge interest on loans to another Jew but only to foreigners. Usuary, which today, means excessive interest charged on any loan of money by an institution or individual. When I was a child, this country had usuary laws that limited the amount of interest that could be charged by a person or institution loaning money for any reason. One of the biggest crimes that were pursued was loan sharking or those persons that loaned money for very high interest. Usually, these loans went to people that could not get loans from banks or other lending institutions and they were usually bad credit risks which led them to be problems for the sharks. We often hear of broken legs and arms as the first warning and then further action to those that did not repay. Most of those loans accrued compound interest and grew to great amounts very fast. Loan sharking and gambling were the favorite industries of the so-called mobs.
The banking industry somehow convinced Congress to pass laws that reversed the usuary law and allow interest rates to rise to any amount that the public would pay. The one good thing about this is that the loan sharks were put out of business except those with the worst credit ratings thus the credit rating system was borne. The first time I became aware of this was during the Carter administration when I started an IRA with a CD that paid 14.5% interest per annum. At the same time home mortgages were being let out at interest rates at 18 - 20%, which shut down the housing market and caused many to lose their homes. The old top rate had been 6% but now it seemed unlimited. As inflation cooled the interest rates came down and in 1978, I bought a house with a mortgage at 5.5% interest. This was quite a change, and the housing market was again going the right way. So, why the cry about usuary because it had corrected itself by public demand except another phenomenon came about.
In 1974, my employer asked me to travel to other drug companies to monitor contract manufacturing. These companies were to manufacture our products using our formulas and our raw materials. My job was to oversee the process. Because of the travel my company asked me to get an American Express credit card for which they paid the annual premium. This card was not the true credit card that we see today because the total amount of the balance had to be paid each month. There was no carry over with interest. At that time the American Express and Diners Club cards were the only, acceptable card at the airlines and most hotels here and in Europe and most business travelers had one or the other. I carried this card until my retirement and only used it for business travel. I had to pay the annual premium after changing jobs, but it was worth it when traveling to Europe and the USA. It was not long until the Visa and MasterCard came out then Discover and more credit cards became available which widened the use of them because a person did not have to pay off the balance each month. The credit card company could charge interest on the money that you did not pay off and the interest grew and grew. The minimum payment decreased until most users did not realize what was happening to them until their monthly bill grew so large, they had a hard time paying it. Credit card use made it so easy to buy things that normally a person would not if they did not have the money in their pocket but now just charge it. Budgeting according to the money available became unneeded because the credit card would allow a person to exceed it painlessly. It was only, painless for a little while or until the monthly statement showed a large debt that was beyond their ability to pay. A night out here or an extra steak in the grocery cart added up and the $20 monthly pay minimum was $200 with the payoff measured in years. The credit card was of no use and had become a debt that was added to the mortgage and car payment along with insurance and the rest of the costs of living. The person or family that had thought of the credit card as a way to increase the connivence of purchasing suddenly is in debt which many have had to lose their homes or cars or declare bankruptcy.
I have 2 credit cards and pay off the balance each month. With a good credit rating they still are asking me to pay over 25% interest on anything that I let ride for another month. That is 2% each month and compared to the 1% return as a gift from the credit card company it looks like I'm being taken for a ride by the bank if I do not pay off the balance each month. At this interest rate you should think of everything that you buy using this card is costing you 25% more than the sticker price. Each $100, spent cost you $125, and if you only pay the minimum, it might go even higher. This is usuary at its best and makes the loan sharks of old look like amateurs. The greatest problem with this system is that most of the users of the credit extended by the banks on their cards is used by the poorest and low-income earners who cannot pay their balances off each month and get themselves into debt that is beyond their control. Their credit is ruined to prevent them from getting a normal loan or buy a car or home. They have become a slave to the credit card and the debt it brought. The next greatest problem is that our education system is not teaching students how to manage their money or make a family budget. In fact, they would rather teach social justice and then let them sink into the credit card trap. The American Express card that I got was only, given out to people that a had a minimum salary that they determined could handle the charges. Now, credit cards are being mailed to college students that have no job or means of paying their charges. Recently, a lady with dementia receiver a few credit cards without requesting them and proceeded to spend to their maximum. The banks never collected because she had no assets to pay them and nothing they could sue for. A friend showed me her recent credit card application which stated that she could be charged between 15% and 30% interest on any balance not paid for depending on her credit rating. She pays her balance each month so the bank will not make a lot of money from her.
Our Congress could do a great help to the lower- and middle-income class in this country if they would revisit the usuary laws and put some limits on interest rates again.
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