Credit card's newest trick: 79.9 percent interest

[Blue_Tires]

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

[cliffordu]

1. Usury.

it's a sin, ain't it??

[DJ13]

2. Its only a sin if you didnt tithe to party in power

[aquart]

5. For the devout, yes. For the godless, no.

Hmmm. Perhaps we now have a way to tell the holy from the unholy.

[Electric Monk]

3. Sick, but nobody is holding a gun to my head to make me sign up for one.

Yet...

[Double T]

4. Only 79.9% interest?

First Premier should shows US their brass balls and go for 99.9% interest on their credit cards. Com'on, the American people love to be screwed royally. The credit card reform compiled by the do nothing congress (dnc) does absolutely NOTHING important, such as capping credit card interest rates. chris dodd, your one giant 'f'ing idiot that desperately needs to lose his job.