The beginning of the end of nasty credit card interest rates? There is a new hope.

There was an interesting article in The New York Times today, “At Checkout, More Ways to Avoid Cash or Plastic” by Claire Cain Miller.   The point of the article is that technology is presenting some increasingly more convenient and trustworthy ways to pay for things.  In essence, Miller is saying that services like PayPal and others are making truly digital money a real and practical possibility, when it doesn’t seem like so long ago that such a thing was humorously suggested to be futuristic in an episode of The Jetsons.  One interesting point Miller makes is the following:

“The way consumers pay for things has transformed only a few times. Coins replaced bartering, paper bills mostly replaced coins, and bank drafts and checks developed as an alternative to cash.”

While this is true, and a good example of “how” trap rethinking where advances enabled people to change “how” they conducted transactions, a key point that Miller doesn’t emphasize is suggested in this quote:

“Opening up the payment systems in a flexible and frictionless way like PayPal is doing is a really big deal,” said Dana Stalder, a venture capitalist at Matrix Partners

Really big deal doesn’t start to cover it.  It’s a widely discussed fact that the typical American is carrying more than $5,000 in credit card debt, usually with an enormous interest rate where some people struggle to make their monthly minimum payment, which makes the debt snowball.  Obviously some of this is because of poor money management skills, fueled by the need to keep up with the Joneses next door, but the fact is that for many, the credit card is a huge step backward in the sense that it straps, if not buries, people with their own debt.

One manifestation of the “really big deal” that Stadler alluded to is that this could well be a window for a service like PayPal and the others to actually slam the door on credit cards and their onerous interest rates.  We saw the online retail bank ING DIRECT eliminate paper checks from retail banking, which prevents people from bouncing checks – I think we could see some similar shifts with the digital money crowd where they charge lower interest rates and do more to help the consumer with their debts.

Until I read this piece, I didn’t have much hope for saving the American public from their credit card debt, but this gives me new hope that an easier way to pay, can become a smarter way to pay and manage debt and eliminate the 20% interest rates.

I am going to stay very interested in how this develops, and I hope to hear the credit card companies say “Ruh-Ro!”

-Ric