>>We're subsidizing deadbeats in housing on the backs of the responsible, why should credit cards be any different?
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>Looked at another way the 'deadbeats' are subsidising you (and me): The credit card companies can only afford to give us free credit by gouging those who cannot pay in full with almost extortionate interest rates. Why would it not be fairer if everyone who used a credit card was charged a reasonable lower rate of interest from the time the purchase was made?

Um, no. Credit card issuers nominally fund their operations through various charges to merchants, which can be as high as 3-4% of purchases.

By allowing consumers to run balances on their cards, card issuers are basically engaging in offering unsecured credit. That's a risky business, they deserve a decent ROI.

Issuers have become better at managing these lending risks, so their profitability during the recent economic boom was very good - in some cases, forming the bulk of the profit of the parent institution. It remains to be seen how their profits hold up in the current downturn.

While in general no-one is forced to use credit cards and take on associated debt, there are some potentials for abuse that require either competition or regulation to keep under control e.g.

- For those who do run a balance (perhaps temporarily), the issuer should not be able to grossly change lending terms unilaterally, because the borrower may not be able to refinance elsewhere

- There aren't that many cards that are widely used/accepted e.g. Visa, MC, AmEx. There is the potential for collusion/price fixing. Some of what looks like competition really isn't e.g. various retailer cards are really just farmed back to one of the biggies, with a markup tagged on, so the retailer card terms are usually worse than the big guys.