Why Credit Card Companies are Located in South Dakota?

If you own a credict card from Citi Bank, have you ever wondered why you get statements that are mailed from South Dakota or why you have to mail payments to addresses in South Dakota.

Well here is a shocker.

Many states have a usury law which limits the interest rate that a company may charge. Most of these laws capped interest rates at 18%. However, some states, such as South Dakota, do not have a usury law, allowing in-state businesses to charge as much interest as they want.

Congress has the power to regulate interstate commerce, which includes regulating nationally chartered banks which do business in more than one state. In the Supreme Court case Marquette v. First Omaha Service Corp. in 1978 the Court ruled that nationally chartered banks do not have to follow state law in which they do business, but only the law of the state in which the company is incorporated. Because state usury laws were not uniform this rendered all of them irrelevant as credit card companies picked up and moved to the states that allowed them to charge the highest interest rates.

Now you know why the interest rates on your credit card is so high.

Read more about the usury laws at South Dakota - A Haven for Credit Card Companies

Also listen to Market Place report on the same topic at Sioux Falls- The City that Credit Built