Why Are Most Credit Card Companies Headquartered in Delaware?

Do you have one credit card or two? No matter how many credit cards you have I can almost guarantee that the credit card company that you owe is headquartered in Delaware, primarily Wilmington. Now why is that you ask? Well all states don't have the same rules and regulations when it comes to credit card rates. Within the state of Delaware there are no usury laws, which mean there are no limits on the interest rates. You could have a rate as high as 30% on your credit card. That's why a lot of credit card companies actually move their headquarters to Delaware then they let you have.

The State of Delaware even altered the tax laws so that financial companies paid less money in taxes. If your headquarter is in Delaware you pay less taxes on your profits not to mention the interest rates they charge on credit cards are unlimited. This also allowed them to expand their data base of customers. Those customers with really bad credit were willing to pay the higher rates of interest since it allowed them to get a credit card. These new laws were enough to make credit card companies take a look at Delaware as their home base.

Credit card companies look for ways to increase your rate. If you make a late payment then your rate could escalate to the highest rate allowed by that lender. Once a year credit card companies will take a look at your credit file to see you are paying other creditors late or to see if you have, what they consider to be a substantial amount of debt. If either situation describes your financial status they will increase your rate even if you are not late with the credit card that they issued to you.

The majority of the other states have caps on the interest rate that you can be charged. Some are capped at 21% and others in the area of 24%. The location of the credit card company definitely makes the difference. If you live in a state which has a cap on the interest rate that can be charged on a credit card it can be pre-empted by the credit card company issuing the credit card. If that company is located in Delaware then the cap issued by the state the consumer resides in does not count in this matter.

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According to www.bankrate.com Lucy Lazarony in her article, "Credit card companies sidestep usury laws," In Marquette vs. First Omaha Service Corp., the Supreme Court ruled that a national bank could charge the highest interest allowed in their home state to customers living anywhere in the United States, including states with restrictive interest caps.
There have been some new changes in the laws but they won't take place until next year.

Author: Lucy Lazarony, "Credit Card companies sidestep usury laws". Bankrate.com