Credit Cards Interest Rates: Amazing Discussion

According to Reagan's act of 1986, credit card interest which was tax-deductible before, removed that deduction from consumer loans except mortgage. At the time credit card interest rates were 19% approximately. This step fueled credit cards business. To have people continue to use cards without being able to deduct the interest they'd paid, issuers would have to lower the interest rates. So that's how we got down to the relatively low rates we've had for a couple of decades now. This caused deduction in credit card interest rates from rates that were some decades ago.

But there is a question that what if a tax deduction for credit card interest paid was allowed for some years, say, five years? Would then people pay off their cards or will increase using them. According to expert, it will result in more use of credit cards. Reason behind this is that they are really not paying the interest because they're deducting it in April.

Some people think that government should allow interest to be deducted to help people get out of debt faster. On the opposite side some says that interest deduction would encourage consumers to spend again.