bad credit, here's the answer
 

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.


http://finance.yahoo.com/news/Credit....html?x=0&.v=4

and they wonder why everyone thinks CC companies are a bunch of crooks...

ok, but if you sign up for it, is it not also your own fault?

everything is everyone's fault if you examine it close enough. but at some point you have to call shenanigans on shit like this. just because you have a vault and tellers doesn't make you any less of a loan shark when you charge people 79.9% interest. companies like this one prey on people who dont think for themselves. which would be fine if it was just available and people know about it, but sending pre approved letters out specifically to people who already fucked up their credit is fucking ridiculous.

amen!

ok, but is that any diff. then say a furniture store marking up their stuff 300% (from what i've heard) isn't it up to the consumer to make such a "stupid" decision?

or a $21000 cel phone bill.....lol

these people have already demonstrated that they make bad decisions. it's not a piece of furniture getting marked up. it's a letter being sent to them, telling them that despite the fact that they are completely irresponsible and can not get credit anywhere else, this company will give them another chance with their credit card. i'd be surprised if they get past the first line in the letter before signing the app and sending it in.

and can you blame the co. for trying to make $? look at the risk they are taking.........there's a cost associated w/ that. should they charge the ? % rate that normal CC co's charge, even though their risk is higher?

So the company is "bad" for advertising to their target market?

They are wrong to attempt to earn a profit while dealing with high-risk individuals?

Exactly

yes, yes they are. if loan sharking is going to be legal now then why cant all of the illegal shit that i like to do be legal. i'm going to go out and send letters to immigrant women asking them to sign a contract to be shipped here, stripped of their possesions and forced to work as prostitutes (in states that legally allow it) i mean shit, they should have known better before signing the contract right?

High risk = High Interest rate
If the government wants to step in and screw with a companies abilty to deal with risk then I would recomend they do what they do in commercial segments.
Nail the high risk consumer with fees.

If a consumer is serious about trying to rebuild there credit and earn the trust of lenders then they should be willing to pay.

If the government is serious about pushing financial institutions to lend more in order to get the economy going then perhaps they should shut the fuck up. the other option for high risk people is to not issue them a CC or loan at all.

i kind of dont want to do this. you guys have heard every point in the damn book from the verizon bill thread. this is the same thing except people who are irresponsible are being targeted instead of coincidentally pulled in. read over the facts, let your conscience be your guide and all that bullshit. i have better things to do... /attention span

I agree with Dragon. If you're going to make loan sharking legal then just make it legal all the way around. You shouldn't have to own a building with a vault and tellers to be a loan shark.

So what will they do when people who already default on much lower interest rate cards default on this? Subprime lending is all about lending to people who've already proven they can;t pay. They should just give people the money, then immediately break their pinkie, and send them on their way. It saves everyone time and hassle.

Good luck with collections, that's all I'm going to say.

Comparing a high interest rate with forcing someone to be a prostitute? I love internet analogies. :lol:

The APR is clear for the person signing up for the card, there is 0 ambiguity about it. In fact, a 79.9% APR is much more clear and potentially cheaper than "initiation fees, admin fees, account maintenance fees, etc."

If someone is really trying to rebuild their credit, this card gives them a chance to do so FREE if they pay their bill in full and on time (recommended for rebuilding credit, unless you're an idiot). If I were in their shoes, I'd take that over paying $256 in fees for a $300 credit limit.

Exactly. They know that's a write-off already, so they have to make their money back in other ways.

What if it gets sent to someone who is mentally incabable of understanding, but does it anyways?
In canada, they passed laws against interest rates like this.
http://www.paliareroland.com/pdfs/MB...ed%20Claim.pdf

And it is a criminal charge, not a civil charge.

:lol: From Wikipedia:

If someone is mentally incapable of understanding a binding contract, there are laws protecting them here in the US, too. As there should be.

This is where the governmnet needs to step in against fraud...If they need to anything, it is this..

If it's 80% on a $10,000 credit limit then that's high. But this right here is 80% on a $300 credit line which isn't so bad. If they put their percentage at 20% on $300 then they wouldn't make much on a very high risk individual. There wouldn't be an incentive for the company to approve money for these people and these people would be left with nothing at all.