If it seems like someone has made a mistake, we assure you it’s not us. NBC San Diego news reported that First Premier Bank of Sioux Falls, SD, is offering a credit card that charges an interest rate of 79.9%. We would like to make the disclaimer and have it to be very clear that we are not promoting this as one of our better deals; however, we do think it would be interesting to our users to see just what lengths credit card companies have gone to to try and gain as much income before federal regulations put forth by the Credit Card Act of 2009 go into effect.
Why Such High Rates?
There are only a few reasons we can think that a bank would actually offer a rate like this.
- Someone finger slipped in the copywriting room
- It gives them good press (Exhibit A)
- It targets consumers who can’t get a card anywhere else, due to bad credit
First Premier Bank is going with the last reason, saying on its website that it “focuses on individuals who have less than perfect credit but are actually still creditworthy.” However, the 79.9% APR, the details of which are hidden in the fine print that comes with the offer, is not the only big number that comes along with the Premier Bankcard. The card also imposes:
- $29 Account Setup Fee
- $95 Program Fee
- $48 Annual Fee
- $7 Monthly Servicing Fee ($84 a year)
- $20 Additional Card Fee
The Credit Card Act
While First Premier Bank has certainly taken it to the next level, many card companies have raised their rates in anticipation of new regulations scheduled to go into effect in February of 2010 that would enforce certain limits on credit card distributors, including lower interest rates. In addition, the Credit Card Act prevents credit card distributors from:
- charging over-limit fees unless the customer chooses to opt-in to a overdraft coverage service
- charging fees for customers to pay their bills in a certain method, unless the customer requests that it be expedited
- cannot charge up-front fees that exceed 25% of the credit limit of a “sub-prime” card
- imposing retroactive interest rate hikes
- various requirements concerning terms of disclosure and payment periods, and the eradication of something called “double-cycle” billing, which adds a finance charge of a previous billing cycle to your current billing cycle.
First Premier Bank’s 79.9% APR card violates a few of these regulations, and the bank will legally be unable to issue this exact card after February 22nd, 2010, when the Credit Card Act regulations go into effect. Until then, however, its a race to the finish, with credit card companies trying to get everything they can out of practices that will soon be unlawful.
More on the Credit Card Act of 2009 can be found here; you can find the full text of the bill at the Library of Congress website.