For some Americans credit cards are a remarkably useful financial tool which improves their lives and those of their families. For others they are the equivalent of handing a bottle of bourbon to an alcoholic.

Whether the law makes one assumption over the other is the difference between control and liberty. Particularly during an economic downturn, all Americans should be sensitive to the temptation to trade liberty for control. Why? Because during economic hardships those who prey upon our fears find it is easier to persuade us to accept greater government control over our lives in exchange for the security they offer.

In an ideal world credit card companies would loan money for nearly no interest and allow an unlimited time to pay it back. Of course in that ideal world the card would be issued by “Grandma Express.” Curiously, in the real world credit card issuers are depicted as mafia dons looking for any and all excuses to break our legs and arms if and when we violate our credit card agreements. The truth is that credit cards issuers are neither doting grandparents nor crime bosses. They are businesses run for a profit.

But in the wake of President Obama’s recent meeting with the major credit card executives it appears that he and Democrats in Congress see now as the time to strike against the credit card industry while the iron is hot; and it’s up to us to decide if the loss of our liberty in the process is a fair trade.

Consider: during an economic downturn even otherwise responsible credit card users may choose to supplement their household needs with greater card use. While taking on more debt seems counter-productive during a downturn, for these people this choice is a rational and superior way to bridge a temporary job loss or income reduction when juxtaposed against selling their house or forcing their children to quit college. But if the credit card rules being considered in Washington go into effect this choice could be taken away.

In the name of ending credit card company abuses, the Obama Administration is pushing a proposal that would cap over-limit fees, ban interest charges on fees, prevent fees for on-line or phone payments, bar almost all interest rate hikes as well place new limits on borrowers under the age of 21 among other changes; all designed to help American credit card borrowers. While each proposal may seem innocuous on its face, these changes if enacted will have negative consequences that will outweigh their benefits and primarily result in greater government control and more loss of individual liberty for credit card holders.

Candidly, not every use of a credit card use is prudent and neither is every use profligate. And most Americans instinctively know the difference between charging on a whim a three day weekend in Vegas and swiping the credit card for a new muffler. One of the main benefits of the credit cards is that every individual card holder is able to make the decision for themselves when and where to use the credit.

This freedom by every card holder to decide when and where they will make a purchase comes with significant risks for the credit card issuers. Instead of having a banking manager approve each and every financial decision prior to extending credit as was the case by and large for most of the 20th century, the credit card holder himself makes the decision. As a result it is crucial that credit card issuers have the ability to continuously evaluate credit card holders both before issuing a credit card and also afterwards (during the time the card is active). Continued...