Now, determine how a perfectly competitive market would respond to changes in the banks' cost of funds. In the recent past, credit card issuers have enjoyed a relatively unencumbered business environment. Ausubel reports that, before 1978, credit card issuers were constrained by state usury laws. But the downwardly sticky interest rates have raised a storm of protest and have many calling for re-regulation of the credit card industry. It will come down without rate ceilings.
Nothing does it like competition.