Delaware attracted big banks and credit card companies by offering liberal interest rates and low taxes in the 1980s, making it an attractive location for credit card companies. Today, several major credit card companies are stationed in Wilmington, including Bank of America, Chase, Barclays, and ING Direct. Consumers should be aware of higher interest rates and read the fine print carefully.
Wilmington, Delaware experienced the loss of many jobs after World War II, mainly because it was used less as a shipping location. To address this issue, state legislators sought a way to bring new business to the state, beginning in the late 1970s. Led primarily by Governor Pierre DuPont, in the early 1980s Delaware tried to attract big banks away from New York and other large financial companies by dramatically drafting tax laws for the banking industries. Laws have also changed to allow banks to charge any interest they want on credit cards.
Several banks, including Bank of America and Chase, were inspired by Wilmington’s flex laws to relocate at least their credit card companies to Wilmington. The ability to charge more interest meant they could offer credit to less creditworthy customers. Although the big banks moved their credit card offices, the response was even greater than DuPont originally estimated. Many smaller banks also established themselves in Wilmington to take advantage of charging much higher interest rates and paying lower taxes on their profits.
Since the enactment of liberal interest rate and low tax laws, Wilmington has become one of the most attractive cities in the United States to establish credit card companies. Other states and cities may have caps on the interest charged, and in fact, the US Congress has even tried to create lower interest rates, and rates and interest. This strategy has not worked, and the response from Congress was tepid at best, placing the interest cap at no more than 30%.
In 1988, Delaware’s laws protecting companies became even stronger. During a period when hostile takeovers were becoming standard, Delaware changed its laws to ensure that most Delaware companies were not subject to this process. The new laws meant that anyone trying to take over a company would have to own 85% of its shares, or with a majority of the shares they would have to wait three years before beginning takeover proceedings. Companies stationed in Delaware, therefore, were better protected than in other states, strengthening the position of any bank or credit card company that created their cards within the state.
Today, there are several major credit card companies stationed in Wilmington. These include Bank of America, Chase, Barclays (which used to be Juniper), and ING Direct. Several smaller companies also have their base of operations in Delaware. What this means for the consumer, especially if you’re going through a lot of credit card offers, is that you’ll find a lot coming from Delaware. If you decide to apply for a credit card from a Delaware company, it’s important to read all of the fine print carefully. You may pay higher interest rates, especially if your credit is not strong. With the luxury of good credit, you may want to shop around for the best credit card deals, especially those in states with laws less likely to favor the credit card industry.
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