79.9% Credit Card

[willriker]

Why dont they bring back usury laws, seriously. This is getting out of hand now.

<http://finance.yahoo.com/news/Credit-cards-newest-trick-799-apf-3359014390.html?x=0&.v=4>

By Candice Choi, AP Personal Finance Writer , On Thursday December 17, 2009, 6:38 pm EST
NEW YORK (AP) -- It's no mistake. This credit card's interest rate is 79.9 percent.

The bloated APR is how First Premier Bank, a subprime credit card issuer, is skirting new regulations intended to curb abusive practices in the industry. It's a strategy other subprime 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 percent of a card's credit line.

In a recent mailing for a preapproved 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.

"It's the highest on the market. It's the highest we've ever seen," said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.

The terms are eyebrow raising, but First Premier targets people with bad credit who likely can't get approved for cards elsewhere. It's a group that tends to lean heavily on credit too, meaning they'll likely incur the steep financing charges.

So for a $300 balance, a cardholder would pay about $20 a month in interest.

First Premier said the 79.9 APR offer is a test and that it's too early to tell whether it will be continued, according to an e-mailed statement. To comply with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards. The bank said "no final decisions" have been made regarding any rate changes for those cards.

First Premier noted that it needed to "price our product based on the risk associated with this market."

The bank declined to specify how many people were offered the 79.9 APR card.

According to First Premier's Web site, the credit cards are serviced by its sister organization Premier Bankcard. The company, based in Sioux Falls, S.D., says Premier Bankcard is the 10th largest issuer of MasterCard and Visa cards in the country, with more than 3.5 million customers.

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.

Even if First Premier doesn't stick with the 79.9 APR, it will likely hike rates considerably from the current 9.9 percent to offset the lower fees, said Shahani of Synovate.

The revamped terms may not be the only changes; First Premier also appears to be moving away from the riskiest borrowers.

The bank typically mails offers to subprime households, meaning those with credit scores below 700. In the third quarter, however, 84 percent of its offers were sent to subprime households, down from 91 percent the same period last year, according to Synovate.

First Premier could be cleaning up its credit card portfolio since the new regulations will limit its ability to raise interest rates. That could mean First Premier won't issue cards as liberally to those with bad credit.

As harsh as First Premier's terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com.

"Even when the cost of credit is astronomical, for people in true emergencies, it's much better than not having access to credit," said Papadimitriou.

Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees.

tldr;

Banks have to cap the annual fee at 25% of the limit of the card. First Premeir Bank will comply with that regulation.

-A 300 limit card will have a 75 dollar annual fee.
-If you breech the limit, or are late you are hit with a 29 dollar late fee.
-oh, and the card has a 79.9% interest rate

GL staying under the limit especialy to avoid the late fee once the new year clicks over. Basicaly they leeching every cent they can out of people that simply cannot afford to be leeched to begin with. Honestly, even in the worst cases... one would not use this card unless it was a dire emergency.

But, then good luck paying it off. I mean if you have a 300 balance on it... make a payment of 100... only 25 of that went to principle. >.> This sort of thing pisses me off to no end.

[Acevalefor]

Easy solution to credit card companies pissing you off........don't fucking use them. Especially sub-prime lenders.

If you can afford a $100 payment, you can wait 3 months and tuck that $100 under a mattress....suddenly you are spending your own $300 instead of relying on someone to lend it to you then bitching about how they are making money off of you

[Katlan]

If you can't afford a regular CC and you go for their 80% one... then you deserve all the interest you accumulate lol. Should learn your lesson if you can't get a regular card. I mean it's a pretty smart, albit dirty, trick... give cards to ppl who can't get one otherwise and watch em get sunk into debt at a monthly rate nobody you can't dare afford.

[Thiefami]

Good money management advice (just dont spend it if you don't have it, wait until you save for it) does not always apply to real life. Perfect world. For some people, sometimes, the lowest living expenses can have you living over your means. No/bad credit means you will have to pay a little extra for that car a month, your insurance will be a little higher a month, you will have to settle for the lesser desirable places to live, but paying damn near the same thing as the adequate living a month. Most people have student loans or will have have student loans, health insurance, doctor bills. These are unfortunate situations, but credit cards can make things manageable when you do not have all the money at one time.

These people are vipers, and it should be frowned upon. If you have bad credit likely you are not doing so well financially. So why do we penalize them by making them pay more it really is an assbackwards system, and this is appalling.

[Gwynplaine]

Easy solution to credit card companies pissing you off........don't fucking use them. Especially sub-prime lenders.

Pretty much.
Unless they're being explicitly fraudulent, if you don't like the deal, then don't agree to it.

[Ksandra]

Good money management advice (just dont spend it if you don't have it, wait until you save for it) does not always apply to real life. Perfect world. For some people, sometimes, the lowest living expenses can have you living over your means. No/bad credit means you will have to pay a little extra for that car a month, your insurance will be a little higher a month, you will have to settle for the lesser desirable places to live, but paying damn near the same thing as the adequate living a month. Most people have student loans or will have have student loans, health insurance, doctor bills. These are unfortunate situations, but credit cards can make things manageable when you do not have all the money at one time.

I'm going to disagree with your statement here. If loans are causing you to spend more money than you make than a cc is definitely not the answer. Why? because loans don't last a month or two they last for years, and that means years and years of building up debt on your card, because if you can't pay it off in a month, then you won't ever be able to until you're done with your loan or you magically get a higher paying job (which is a terrible thing to depend on).

[Mojo]

Good money management includes understanding when a line or credit or loan is appropriate (trying to never take a loan or not use credit is just foolish, you can get much farther in life if you're not ultra frugal.) I recently saved myself around $1500 (and thousands in the long run) every six months by going into debt with a higher interest rate. These cards are no different than those sketchy check forwarding places you find on every street corner. The sad thing is that people actually put themselves into situations where might need to rely on them. They're never ideal to use, everyone should always keep around $1000 in savings just in case a situation where you do need a bit of quick money arises. It might be hard saving up that $1000, but I'm sure almost anyone can do it.

[archibaldcrane]

79.9% interest eh?

First Premier Bank, I like the cut of your jib. You've got balls, kid.

[Priran]

79.9%

because 80% would just be ridiculous

[Mojo]

I'm going to disagree with your statement here. If loans are causing you to spend more money than you make than a cc is definitely not the answer. Why? because loans don't last a month or two they last for years, and that means years and years of building up debt on your card, because if you can't pay it off in a month, then you won't ever be able to until you're done with your loan or you magically get a higher paying job (which is a terrible thing to depend on).

Not necessarily. In my case, I had an auto loan with around $3200 that I still needed to pay off. The interest rate on the auto loan was 6% and the monthly payment was $213. That amounted to somewhere around $135 in interest over the last 16 months of the loan. I dumped my savings into the loan and took out a $3000 line of credit with a 12% interest rate to pay the rest off. The minimum payment is $90 per month (actually only $25, but considered bad if not at least $90), so if I just did that I'm looking at $335 over the course of 27 months.

However, my six month insurance premium went from $948 to something like $340 because I no longer need full coverage. That alone saves me $1620 over the next year and a half. I also don't have a car payment, so I have the option of paying more interest over the long run and just making the minimum payment to my line of credit. That means my $160/month insurance premium and $213/month car payment went to a $60/month insurance and $90/month line of credit payment. I probably won't do this though because I can just dump my entire paycheck into the line of credit and lower the premium, although you can see how this might be the line between survival in rough times and having your car repossessed. I think I'll probably actually end up paying around $200 to interest until the line of credit is paid off, maybe even less.

This has made my life a lot less stressful. I still have access to my savings via that line of credit and, if it ever comes to it, I can get by just paying the $25/month payment (which is still more than the interest.) I own a car too that nobody can seize from me. My credit is going up faster because, due to just dumping my paycheck into the line of credit, every purchase I make comes from there. Not to mention, when I'm done paying it off, I also have a $3000 line of credit I can use for something if I need it.

Edit: Meant to say that my life has become LESS stressful...

[willriker]

being financialy responcible is one thing, but in a world where many people have half of thier paycheck going directly to rent... then perhaps another paycheck going towards an automobile (with all the things that come with it gas/insurance/maintenance). these individuals are left with a single paycheck to live off of if they are lucky. Then you have to pay for food, clothing... and now you have absolutely nothing left to save for a rainy day.

Those are the people that this card was designed to service. Anyone in a better position would not even think about signing up for this card.

Now lets say something comes along and they need the extra 300... even if these people can muster up 100 dollars a month to pump onto the card, you are talking about a whole damn year for these people to pay off a 300 dollar line of credit. Its truely obsurd. I dont know how these people can sleep at night with what they are trying to do.

FYI this very same card use to be 9.99% with a 250 dollar annual fee. Which was much more reasonable for people in that situation. not this 75 dollar annual fee with 79.9% interest rate.

[Ksandra]

However, my six month insurance premium went from $948 to something like $340 because I no longer need full coverage.

That is different than what I was saying though. I was referring to the scenario Thiefami was giving, not an everything situation.

If someone pays off their loan then yes they'd be saving money. But in Thiefami's situation they have loans that are bringing them to more than they can afford, and charging their extra on the card. Leading to extreme poor money managing.

[Mojo]

If someone ever puts themself in a situation where they can't save money, they aren't being financially responsible. It can be hard to save, but anyone in almost any situation can do it, they just need to make sacrifices of some kind. Again, those kinds of cards aren't ever necessary, it's just a shame that people put themselves in situations where they might be forced to rely on them.

[Mojo]

That is different than what I was saying though. I was referring to the scenario Thiefami was giving, not an everything situation.

If someone pays off their loan then yes they'd be saving money. But in Thiefami's situation they have loans that are bringing them to more than they can afford, and charging their extra on the card. Leading to extreme poor money managing.

Even without the insurance savings, it still would have made my life much more livable because the flexibility that the line of credit offers. The problem with Thiefami's situation is more like living out of your means.

[willriker]

You should think about reading "Nickle and Dimed" by Barbara Enrenreich. It was the New York Times Bestseller, which was also acclaimed by Newsweek, the New York Times Book Review, and O: The Opera Magazine.

It documents the struggle that far far too many people live with on a day to day basis in a way that i dont think can ever be outdone. There are more people than you can imagine that live a life that Thiefami described. And, to tell the unfortunate truth, every single one of us is a layoff-illness-addiction- or good old fashioned hard time away from living the very same lifestyle that these hard working Americans have never been able to escape from.

After reading that book, or even a single chapter, i really think you will come out of the experience with an entirely differant veiwpoint on this topic.

I would not consider riding a bike to work, while living in a trailer to be living out of your means in the slightest. And this card would truely hurt those people... yet, by thier own admition[sp?], thats who they are marketing this card to.

The people that are releasing this card are the worst kind of evil.

[QuePsiXI]

Easy solution to credit card companies pissing you off........don't fucking use them.

Which would be fine if A) they never send any advertisements whatsoever encouraging anybody to apply to this, and B) no credit wasn't as frowned upon as bad credit.

[Senoska]

If you can afford a $100 payment, you can wait 3 months and tuck that $100 under a mattress....suddenly you are spending your own $300 instead of relying on someone to lend it to you then bitching about how they are making money off of you

I have the money in my bank account and I carry a debit card but I occasionally use my credit card for random things (See: McDonalds, Small Christmas gifts, Gas, etc.) just to build my credit. Pay that shit the day the bill comes.

[Shuvo]

The funniest part is how the taxpayers funded a ~400billion interest free loan to the banks to bail them out.... who paid it back by charging obscene interest on loans back to the taxpayer..

[Leif]

What did you guys expect?

When you tell credit card companies they can't give people credit rates based on their risk anymore and have to allow more people to get credit, what do they do? Well, they raise the rates because they can't charge the proper annual fee.

So what do people think the solution is? I know! Regulate more! That will fix the problem.

For those who can't detect the sarcasm, this kind of thinking is seen in behaviors titled "fighting fire with fire" and "getting sober by downing another drink" that lead to such events such as the current financial crisis.

[Ksandra]

holy shit how the fuck derail...stupids.

[edit] thread cleaned, keep this ontopic. Homophobicrebublicanrandombullshitpartywars do not count.