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Credit Card Company Raises Interest Rate to 79.9 Percent APR--Legally

Ridiculous credit card interest rates could be the contributing factor to consumer's seeking the help of bankruptcy protection. A 59 year old woman saw her interest rate for a card issued by First Premier Bank jump from 29.9 percent to 79.9 percent, only to find out it wasn't a mistake.

Due to a 2009 law, called the Card Act designed to curb abusive practice by credit card lenders, Congress no longer allowed card issuers to retroactively increase interest rates charged to borrowers. However, nothing in the law states that credit card companies cannot change rates for future purchases the borrower makes. So despite the outrage, the 79.9 percent APR is completely legal.

First Premier Bank is a company that offers credit cards to consumers with bad credit and indicates that they price their product based on the "risks associated with the market."

Milles Beacom, First Premier Bankcard CEO, says that issuing a credit card with a high interest rate to individuals with bad credit is no different than issuing high auto insurance to individuals with bad driving records. "If you have a bad driving record, you have to pay more and once your driving record improves, your premiums will come down. When the cardholder's credit score improves, they may start to qualify for more traditional types of credit card offers with better rates and less fee," he says.

The Bank has since lowered the 79.9 percent APR to 59.9 percent - still an extremely high interest rate compared to most card offers - but since the change, hundreds of thousands of people have signed up.

Sources: Huffington Post, "Credit Card Horror Stories: 'My Credit Card Had A 70.9% APR,'" 7 Feb 2011

Huffington Post, "79.9 Percent Interest Credit Card From First Premier Bank Skirts New Regulations," Candice Choi 17 Dec 2009

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