New regulations designed to stop credit card lending abuses cap the first-year fees a credit card issuer may charge at 25% of the credit limit. So First Premier Bank is doing just that, charging $75 for a credit card with a $300 limit. But since the new law does not limit interest rates, First Premier Bank cards come with an interest rate of 79.9%.
That is $20 per month on a $300 balance.
Before the new law, First Premier Bank offered a card with a $250 that came with $256 in first-year fees. These cards are sometimes called “subprime credit cards” because of the awful fees that stack up. They are also sometimes referred to as “payday credit cards” for the oppressive fees on small balances, which are similar to many payday loans.
How does First Premier Bank justify its cards? Odysseas Papadimitriou, CEO of CardHub.com, says that “[e]ven when the cost of credit is astronomical, for people in true emergencies, it’s much better than not having access to credit.”
Maybe so, but the First Premier Bank card racks up fees so fast there may not be any credit to rely on, anyway.
This credit card’s newest trick? A 79.9 percent interest rate | StarTribune
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This is just another reason why we need the Consumer Financial Protection Agency. Thanks for the article.