Today is January 20.  It is the day that President Trump wanted to institute one of his ideas for making life more “affordable”.  That idea is a 10% cap on interest rates on credit card balances for one year.

A recent Debt.com survey about funeral expenses and death, which you can access an article about here, states that 59% of Americans have taken on credit card debt for a loved one’s “End-of-Life” care which may include funeral expenses as well as medical bills and some other expenses.  So, it appears that dropping the rate to a maximum of 10%, from it’s 20.97% average rate according to the Federal Reserve as mentioned in this article from Reuters, would be a welcome solution for those that would be paying off this debt over time.

However, that same Reuters article argues that credit could be severely restricted according to this quote, “. . the Electronic Payments Coalition, ​which represents financial institutions and card networks, said that 82% to 88% of open credit card accounts would be closed or severely restricted under a 10% cap. While subprime borrowers would be hardest hit, a cap would lead to ​higher annual fees for most borrowers and reductions in credit card rewards and more monthly account charges, lenders ‍argued.”

Related Article —  Trump floated a 10% credit card interest rate cap.  Here’s what that could mean for consumers.  CBS News

Related Article —  GOP breaks with Trump on credit card interest rate cap proposal.  The Hill

Related Article —  Bilt offers credit cards with temporary 10% APR after Trump proposes interest rate cap.  CBS News

Tom Anderson
Funeral Director Daily

Funeral Director Daily take:  There seems to be a real Catch-22 with this 10% interest rate cap on credit card accounts.  That “catch” being what is best for the group of consumers mentioned above?. . . 1)  The ability to have credit availability but with a high rate of interest on unpaid balances or 2) A loss of credit availability for the time being (at least), but a 10% cap on their interest payment until they have a zero balance?

It’s pretty conceivable that different consumers will have different choices on those options, but as a funeral home or cemetery business, I certainly would want my consumer families to have “credit availability” to cover costs that might be incurred.

And, what about your business loans for facilities or operations?  If banks need to drop credit card interest from today’s average of 20% to Trump’s desired 10% do you think that business banks will just eat that loss of income?  Or, is it more likely they will raise the interest on other lines of loans, such as business and autos, to make up some of that interest income loss? . . . I would surmise that small business loans would rise to make up for some of this credit card interest loss. . . . and that would not be good for funeral home and cemetery owners.

Today’s article, and simply this thought process of loans to pay for Death Care expenses, leads to the topic of Preneed trusts and insurance.  I’ve always looked at Preneed, not only as a way to increase market share over time, but as a way to increase cash-flow and an overall shorter average payment time period for receivables.  With Preneed (and insurance assignments) you can be paid in a matter of days and without the discounts you have to give to credit card processors.

The Debt.com survey recognizes this fact.  Their survey makes this comment about Preneed, “End-of-Life financial planning remains an overlooked gap in family communication with half saying they haven’t discussed post-death debt or funeral costs with their loved ones.”

From my point of view, it continues to be good for not only funeral home and cemetery businesses, but for consumers as well, to continue to advocate the importance of Preneed arrangements.

More news from the world of Death Care:

• Boundary Bay Cemetery running out of room.  Delta Optimist    British Columbia (Canada)
• Families turning to crowdfunding and loan sharks to pay for funerals – report.  The Impartial Reporter (Great Britain)
• Proposed New Hampshire laws range from spying with drones, to weight-loss drugs, to composting dead relatives.  Manchester InkLink (NH)
• Average funeral cost hits US$ 6,106.  Credit Connect (Great Britain)

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