Final answer:
National banks can choose the higher of two interest rates: their home state's rate or the consumer's state rate, and while interest rates can be high, there is no specific cap of 35% or a federal cap at 25%. Companies justify higher rates due to the risk of default, but responsible cardholders can avoid interest by paying balances on time.
Step-by-step explanation:
The question relates to national banks and the regulations concerning the interest rates they can charge on credit cards. Among the options given, statement (a) reflects a practice allowed for national banks — they can indeed choose to use the interest rate of their home state or that of the consumer, often opting for whichever rate is higher. It's worth noting that credit card interest rates often go higher than many consumers realize, with some offers showing rates ranging from 17-20%, contrary to the options suggesting a cap at 35% or 25%.National banks and credit card issuers justify these rates by pointing to the risks associated with lending, including the possibility of borrowers defaulting on their repayments. Because credit card companies incur losses when customers fail to pay, they often charge higher interest rates to mitigate these losses.
However, cardholders can generally avoid paying interest altogether by repaying their balances within the stipulated 'grace period'.The correct option about national banks' credit cards is d) They may not charge above 25% interest under federal law. Under federal law, national banks are subject to interest rate caps, and they cannot charge interest rates above a certain limit, which is currently set at 25%. This is done to protect consumers from excessive interest charges. While other options might contain some partial truths, option d) is the most accurate and complete statement regarding national banks' credit cards.