Most banks that issue credit
Most banks that issue credit cards charge interest rates on credit card debt that are ten percentage points higher than the rates those banks charge for ordinary consumer loans. These banks’ representatives claim the difference is fully justified, since it simply covers the difference between the costs to these banks associated with credit card debt and those associated with consumer loans.
Which of the following, if true, most seriously calls into question the reasoning offered by the banks’ representatives?
(A) Some lenders that are not banks offer consumer loans at interest rates that are even higher than most banks charge on credit card debt.
(B) Most car rental companies require that their customers provide signed credit card charge slips or security deposits.
(C) Two to three percent of the selling price of every item bought with a given credit card goes to the bank that issued that credit card.
(D) Most people need not use credit cards to buy everyday necessities, but could buy those necessities with cash or pay by check.
(E) People who pay their credit card bills in full each month usually pay no interest on the amounts they charge.
Hi Riya,
Premise: The interest rates on credit card are 10 percentage points higher than those on consumer loans
Bank representatives’ reasoning: These high rates are justified . This difference in interest rates covers the costs associated with credit card debts
We have to weaken the reasoning given by the bank reps. In short, we need to pick an answer that shows that these higher interest rates are not justified.
Option C does just that by pointing out that there are ways other than increasing interest rates in which the banks can cover their credit card costs. If 2 to 3 % of the selling price of every item bought with a given credit card goes to the bank, then that money might help cover the costs fully or partially
Hope this helps!
