Credit card regulation is about to enter into full gear, and credit clients are urged to be wary of underlying offers in new credit card which offers interest rates of as much as 79.9%.
The rates appear outrageous and as a shock to many. Issuers intend to target the riskiest borrowers to find means to stay in business while complying with the new credit card reform law.
CEO of South Dakota-based Premier Bankcard Miles Beacom said in a statement that their price is based on the 'risk associated' with the subprime credit market. He added that the high rates would allow the client to make the decision on whether they would purchase the product or not.
Premier already mailed 'test offers' in September and October last year which featured 79.9% and 59.9% APRs (Annual Percentage Rates) on their cards, issued by First Premier Bank, with credit limits of $300.
Charging interest rates this high is actually 'legal'. As required by the Truth in Lending federal act, the issuer is minimally compelled to 'fully disclose' such terms. However, this rate is still much higher than prevailing penalty rates and APRs across the country.
Last February 12, a recent report indicated that 14.15% was the national average for 'bad credit' credit cards.
Capitol Hill is currently debating the merits regarding the reinstitution of usury rates on a national level to provide limits on credit card interest rates. Last December 11, a bill was introduced in the House of Representative to institute a 16% credit cap. The latest attempt has been welcomed development despite the success of lobbyists in past the quash efforts to impose credit limits.
Consumers are urged to read the 'fine print' of new offers and seek sound counsel to explore viable options before falling 'victim' to 'astronomic' rates.
Counselor Sandy Shore of New Jersey-based consumer credit counseling agency Novadebt said that all individuals who feel restricted in choosing any of the new cards on the market should get the help of a credit counselor.
Shore said that other alternatives may include secured cards and debit cards. She also said that counselors may provide invaluable information for any client to find alternative means to reestablish their credit record according to their situational needs.
Customers are cautioned to wait and not just go for the first high-interest credit card offer they receive since there may be other insurers who might provide better arrangements.
Shore said that no one should be shocked at the First Premier card since these are aimed at potential clients with poor credit.
Beacom revealed that about 2% of their clients, who received their offers, have already applied for the card.