Is there a law or regulation that governs the maximum allowable interest amount that can be charged on credit cards or in agreements where credit is extended?
The word you're looking for is usury - the crime of lending money at rates above an amount set by law. In Canada section 347 of the Canadian Criminal Code makes it illegal to charge more than 60% annually.  Since most Canadian credit card annual interest fee is below this they are within that legal limit.  However this is limited only to the rate and not necessarily a cap on the absolute interest charges. In the U.S., each state has its own local usury law. This website has a separate page for each state summarizing the local usury law and provides a reference to the local statute. The rules aren't simple: some set absolute limits, some appear to be pegged to something like the Prime Rate, some states don't have a general usury limit, the rules don't apply to certain loans because of the type of loan or lender, etc. There are US Federal laws dealing with usury, primarily in the context of racketeering -- the RICO Act lets the Feds go after racketeers that violate local usury laws beyond certain parameters. "In the US, usury is complicated and depends on the type of account, the bank charter and the where the bank makes credit decisions. Most major US credit cards are issued by entities in Utah, South Dakota and Delaware. None of these states have usury limits. Many states have usury limits. In New York, for example a loan may not exceed 16% interest, if the institution is supervised by the State.  Credit card issuers are usually chartered as ""National Associations"" (ie Federally chartered banks regulated by the Comptroller of the Currency). There is no Federal usury statute, and Federally chartered banks are allowed to ""export"" many of the regulations of the state where credit decisions are made. Small states like South Dakota basically design their banking regulations to meet the needs of the banks, which are major employers." What are those maximums, and do all countries have them? Usury, lending money for any interest at all, used to be anti-biblical: it wasn't a Christian thing to do, and so in Christian countries it was Jews who did it (Jews who were money-lenders). Asking for interest on loans is still anti-Koranic: so Islamic banks don't lend money for interest. Instead of your getting a mortgage from the bank to buy a house, the bank will buy the house, which you then buy from bank on a rent-to-own basis. Further details: In the EU, you might be looking for Directive 2000/35/EC (Late Payment Directive). There was a statutory rate, 7% above the European Central Bank main rate. However, this Directive was recently repealed by Directive 2011/7/EU, which sets the statutory rate at ECB + 8%. (Under EU regulations, Directives must be turned into laws by national governments, which often takes several months. So in some EU countries the local laws may still reflect the old Directive. Also, the UK doesn't participate in the Euro, and doesn't follow the ECB rate)
"I also feel it's important to NOT get a credit card. I'm in my mid 30's and have had credit cards since I was 20, as has everyone I know. Every single one of those people, with the exception of my dad, is currently carrying some amount of credit card debt - almost always in the thousands of dollars.  Here is the essential problem with credit cards. Everyone sets out with good intentions, to use the credit card like a debit card, and pay charges off before interest accrues. However, almost no-one has the discipline to remember to do this, and a balance quickly builds up on the card. Also, it's extremely easy to prioritize other bill payments before credit card payments, resulting in a balance building up on the card.  It's almost magical how quickly a balance will build up on a credit card. Ultimately, they are simply too convenient, too tempting for most human beings. The world, and especially the North American world, is in a massive debt crisis. It is very easy to borrow money these days, and our culture is at the point where ""buy now pay later"" is an accepted practice.  Now that I have young children, I will be teaching them the golden rule of ""don't buy something until you have cash to pay for it in full!"" It sounds like an over simplification but this one rule will save you an incredible amount of financial grief over time." "Check whether you're being charged a ""Cash advance"" fee with your withdrawals, because it's being withdrawn from your credit card account. If that's happening to you, then having a positive balance on your credit card account will dramatically reduce the fees. Quoting from my answer to a similar question on Travel Stack Exchange: It turns out that even though ""Cash advance fee - ATM"" has ""ATM"" in   it, it doesn't mean that it's being charged by the ATM you're   withdrawing from. It's still being charged by the bank of your home   country. And depending on your bank, that fee can be minimized by having a   positive balance in your credit card account. This isn't just for   cards specially marketed at globehoppers and globeshoppers   (mentioned in an answer to a similar question), but even for   ordinary credit cards: Help minimise and avoid fees An administrative charge of 2% of the value of the transaction will     apply to each cash advance made on your card account, where your     account has a negative (debit) balance after the transaction has been     posted to it. A minimum charge of $2.50 and a maximum charge of $150     will apply in these circumstances. Where your account has a positive     (credit) balance after the transaction has been posted to it, a charge     of $2.50 will apply to the transaction. Any such charge will appear on     your credit card statement directly below the relevant cash advance. A $2.50 charge if your account is positive, versus $20 if the account   is negative? That's a bit of a difference!" "With the scenario that you laid out (ie. 5% and 10% loans), it makes no sense at all. The problem is, when you're in trouble the rates are never 5% or 10%. Getting behind on credit cards sucks and is really hard to recover from. The problem with multiple accounts is that as the banks tack on fees and raise your interest rate to the default rate (usually 30%) when you give them any excuse (late payment, over the limit, etc). The banks will also cut your credit lines as you make payments, making it more likely that you will bump over the limit and be back in ""default"" status. One payment, even at a slightly higher rate is preferable when you're deep in the hole because you can actually pay enough to hit principal. If you have assets like a house, you'll get a much better rate as well. In a scenario where you're paying 22-25% interest, your minimum payment will be $150-200 a month, and that is mostly interest and penalty. ""One big loan"" will usually result in a smaller payment, and you don't end up in a situation where the banks are jockeying for position so they get paid first. The danger of consolidation is that you'll stop triggering defaults and keep making your payments, so your credit score will improve. Then the vultures will start circling and offering you more credit cards. EDIT: Mea Culpa.  I wrote this based on experiences of close friends whom I've helped out over the years, not realizing how the law changed in 2009.  Back around 2004, a single late payment would trigger universal default on most cards, jacking all rates up to 30% and slashing credit lines, resulting in over the limit and other fees. Credit card banks generally apply payments (in order, to interest on penalties, penalties, interest on principal, principal) in a way that makes it very difficult to pay down principal for people deep in debt. They would also offer ""payment plans"" to entice you to pay Bank B vs. Bank A, which would trigger overlimit fees from Bank A. Another change is that minimum payments were generally 2% of statement balance, which often didn't cover the monthly finance charge. The new law changed that, resulting in a payment of 1% of balance + accrued interest. Under the old regime, consolidation made it less likely that various circumstances would trigger default, and gave the struggling debtor one throat to choke. With the new rules, there are definitely a smaller number of scenarios where consolidation actually makes sense." The answer is the next sentence from the Wikipedia article: The precise manner in which interest is charged is usually detailed in a cardholder agreement which may be summarized on the back of the monthly statement.  Your previous question on credit card interest rates quotes the sentence after this. You have to review what the agreement for your card says. Also keep in mind the bank wants to make money from you. The more interest and fees they collect, they better they like you. If enough card holders adjust their behavior, to minimize interest and fees; the bank will then adjust the credit card agreement to get money a different way.  Yes, you are right it would seem fair to only charge interest on the smaller amount, but that doesn't allow the credit card issuer to maximize profits. There is only a catch if you swallow the hook.  The hook is that the bank hopes you will use the increased credit limit to buy more stuff, and not pay what you owe before the interest-free period expires.  This will allow them to charge their high interest rate on the outstanding balance.  Now if you don't increase your spending, and keep paying your balance in full, nothing happens. "I'm not sure that OP was asking if he/she personally should have more available credit, so I will answer the other interpretation: should that particular card have a higher limit? The answer is ""no.""  The range varies vastly by issuer.  Starting limits vary widely from issuer to issuer even with identical credit histories.  Some issuers never automatically increase the limit, some periodically conduct account reviews to determine if an increase is warranted.  Some like to see higher spending habits each month.  Personally, my cards range from $500 to $25000, and the high and low extremes are the same age. You can search for tips on how often to request increases for your particular card, or what kind of spending habits the issuer prefers.  An important note: You do not need to carry a balance to make the issuer happy.  You never need to pay a cent in credit card interest." I have a Citi card that gives me checks all of the time.  Most of the time it requires the 3%/minimum $10 or whatever, but occasionally when they're trying to sucker you into borrowing money from them they will let you take $1,500 w/ no fee for 6 months.  Outside of that I've never seen it exist in modern credit cards. "I don't know of a guideline to how often you can ask for an increase. You can ask as often as you like. As for consequences, refer to Is there a downside to asking for a credit increase?, where the consensus is that, aside from a possible (temporary) hard pull on your credit report, there's probably no risk to asking. Depending on your credit score/history, and especially in the current economy, you may get ""no"" as an answer most often. You can try talking to your card's Credit Department or even Customer Retention Department as they may have more leverage. They may say yes or no or that they need to review your account. When you do ask for an increase, I would make sure to ask if there will be a hard pull on your report, if there is any cost or downside to applying, and to make sure that this would be an increase to your current credit line, not a new account."