Credit cards are used by hundreds of millions of people and are very convenient, with some added perks like cash back for certain purchases. Unfortunately, they can often be abused and then the consumer is left with a large debt that they have difficulty servicing.

Another way of looking at these issues is the huge amount of credit card debt, and the way that banks manage this. One weapon that banks have been using with increasing frequency, is the “universal default” clause of credit card agreements. A bank can check the consumer’s credit rating, his FICO score, and if it thinks that it is too high or has gone up, the bank can raise the interest rate on the consumer’s credit card debt. Some states have no limit on the interest rates that can be charged, there are no usury laws. That is why a large number of credit card operations are run from South Dakota, which has no usury laws. Your credit card rates can rise dramatically, of course if you are late in your payments. Studies show that about 35 million Americans pay the minimum payment on their credit cards month after month that can be as low as 2 percent of the balance. If a consumer does this, they end up paying a yearly interest rate of over 13 percent, which means paying more for your purchases. Many of these people eventually end up in debt counseling or bankruptcy. In fact, the high rate of defaults on unsecured debt was the main reason for the banking industry’s pressing for the passing of the 2005 Bankruptcy law, which makes it more difficult to write off unsecured credit card debt. After all, the credit card debt market is a fairly large sector, of about $2.2 trillion and growing every year.

Meanwhile, since late in 2005, the Bank of America has become the dominant player in the credit card field. They bought up the $35 billion MNBA Corporation, which is Delaware’s largest employer. The combined corporation has almost 120 million credit card accounts and a dominant position in the credit card market. The result is that three players; Bank of America, JPMorgan Chase and Citibank, control 55 percent of the total credit card market. This is a parallel development to the fact that these three banks control something like 90 percent of the derivatives contracts. Derivatives are speculative instruments derived from the value of either commodities like grain or oil, or financial indexes like interest rates, or more complex instruments like caps and swaps.