Credit card's newest trick: 79.9% interest

[njlib]

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.

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



How is this legal???

[hobbit709]

1. It's legal because of our corporate owned Congress.

[AngryOldDem]

2. Because they can do it and get away with it. n/t

[JoDog]

3. Perfectly legal

While the new laws limit the amount of fees that can be charged for an account, they say absolutely nothing about the amount of the interest rate. So the sky's the limit.

First Premier's defense in this is that they cater to a very specific market: people already in severe credit trouble or post bankruptcy. The bank, so they say, is taking a risk even offering credit to these customers. It then needs the fees and rates to be high on all customers so they can offset the loss from the minority of customers that are bound to default. I can attest that after my bankruptcy, First Premier was one of the first banks to come courting me. I read the small print and tossed the offer in the trash.

The hell of it is, one of the first things people in bankruptcy are encouraged to do after their case closes is to get a credit card. The strategy is to make a few purchases, then make regular, on-time payments. The purpose is two-fold: Get something positive on your credit report and prove that you've learned your lesson. After the bankruptcy, my credit rating took a bump up as everything negative was wiped off.

Certain banks like First Premier and Capital One (whom I did get a card from) make it their business to go after this particularly depressed segment of their population.

[njlib]

4. Capital One was my post-bankruptcy card also

Started out as a secured card and they now trust me with a 10K limit. I've been pretty satisfied with them over the years, but they're all really just a bunch of vultures.

It's just sickening that this this allowed. I know our "representatives" are corporate-owned and this shouldn't surprise me. I guess what surprises me is the outright gall and BALLS to do this and the fact that they CAN get away with it.

[JoDog]

5. And I am glad I got it

Had to get my brakes fixed, and while the limit on the card is only $1,000, it got the work done. It will take me a little while to pay it off, but hopefully a good payment record will help my financial rebuilding.

[kctim]

6. People who use this card

being allowed to walk around free, is what should be illegal.
Idiots.