It’s no secret that credit card issuers have been jacking up their rates over the past few months. And these rate increases haven’t just been targeted at those with poor credit. I’ve had many people with good credit who are current on their credit cards tell me that their rates have been raised to 19.9%, 24.9% and even 29.9%!
But a new credit card issued by First Premier Bank, a sub-prime credit card issuer, makes those interest rates seem like a bargain.
Are you sitting down?
If not, you might want to find a seat before you read any further.
OK. Here we go.
First Premier Bank is now offering a pre-approved credit card carrying the astronomical interest rate of 79.9%!!
No, your eyes aren’t playing tricks on you.
You read it right.
79.9%!!!
That previously unheard of APR is how First Premier Bank is skirting new regulations intended to curb abusive practices in the credit card industry. It’s a strategy other sub-prime card issuers could start adopting to get around the new rules.
Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25% of a card’s credit line.
In a recent mailing for a pre-approved card, First Premier lowers fees to just that limit — $75 in the first year for a credit line of $300. But the new law doesn’t set a cap on interest rates. Hence the 79.9 APR, up from the previous 9.9 percent.
In a mailing sent to prospective customers in October with the revamped terms, First Premier writes “…you might have less-than-perfect credit and we’re OK with that.” The letter notes that an online application or phone call is still required, but guarantees a 60-second status confirmation.
The letter also states there are no hidden fees that aren’t disclosed in the attached form. That’s where the 79.9 percent interest rate and $75 annual fee are listed. There’s also $29 penalty if you pay late or go over your $300 credit limit.
Can you say “predatory lending?”
Source: BusinessWeek.com
