A credit card with a 79.9 Interest Rate. True or False?

Online, February 18, 2010 (Newswire.com) - No, you didn't misread the headline, it's very true, according to Yahoo Finance somewhere out there is a credit card with a 79.9 percent interest rate. Even more shocking, the targeted consumers (those who rely heavily on credit, and cannot get approved for cards elsewhere) are actually biting.
"It's the highest on the market. It's the highest we've ever seen," said Anuj Shahani, an analyst with Synovate, a research firm that tracks credit card mailings.
The massive APR is how First Premier Bank, a subprime credit card issuer, is dodging new regulations intended to reduce abusive practices in the credit card industry. It's a strategy that could gain popularity, as other card issuers begin adapting to the new regulations.
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.
To the average consumer, the terms appear to be staggering; however First Premier aims for consumers with bad credit who likely can't get approved for cards elsewhere. It's a group that tends to lean heavily on credit too, meaning they'll likely incur the steep financing charges. The card may appear as a "last chance" for these targeted consumers.
According to an e-mailed statement, First Premier claims the 79.9 APR offer is a "test" and that it is too early to tell whether it will be continued. For example, for a $300 balance, a cardholder would pay about $20 a month in interest. In accordance with the new law, the bank said it will no longer offer the card that has $256 in first-year fees as of Feb. 21, 2010. However, customers will still be able to use their existing cards.
This may be First Premier's attempt at cleaning up its credit card portfolio since the new regulations will hinder its ability to raise interest rates. That could mean First Premier won't issue cards as liberally to those with bad credit. "As harsh as First Premier's terms seem, that could be a blow to those who rely on the card, said Odysseas Papadimitriou, CEO of CardHub.com."Even when the cost of credit is astronomical, for people in true emergencies, it's much better than not having access to credit," said Papadimitriou.
Until Feb. 21, First Premier is still offering its even-higher-fee card online. So the price for credit the bank charges is at least $256 in first-year fees.
Tami Brown, President and CEO of TurnKey Consulting said "How is this not an unfair trade practice? It is a direct attempt to skirt the spirit of the credit card reform act. Sadly, consumers will be jumping at this offer to be able to pay bills, and buy gifts this year."

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