A recent post at Credit Slips, a blog about credit and bankruptcy, analyzes a new First Premier Bank credit card that carries a whopping 79.9% interest rate. While this sounds astounding, the post notes that the 79.9% APR card may actually be cheaper than previous First Premier credit cards when you consider fees and interest as a single cost. The post explains that effective APR for the old First Premier card, which had a “stated” APR of 9.9%, is 112.3% because the numerous fees the card carried resulted in a total cost of $280.75 to gain access to a $250 line of credit for a year. The effective APR on the new First Premier card is 104.9%, as it will cost $314.70 to gain access to a $300 line of credit for a year.
The post cautions against concluding that the CARD Act is increasing the cost of credit, as many in the card industry threatened. The First Premier cards are a good example of this. The old card carried a stated interest rate of 9.9% when the actual cost was much higher. But because of the new requirements of CARD Act, the new First Premier card more accurately informs consumers of the actual costs of the card by revealing the 79.9% interest rate.
New Credit Card Tricks, Traps, and 79.9% APRs | Credit Slips | December 18, 2009