Sub prime lending is risky business, but are these people serious?
From the AP:
Typically, the First Premier card comes with a minimum of $256 in fees in the first year for a credit line of $250. Starting in February, however, a new law will cap such fees at 25 percent of a card’s credit line.
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.
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The terms are eyebrow raising, but First Premier targets people 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.
We Kashkaried the balance and payments, and here’s what we came up with:
A $300 balance, at 79.9% APR, making an estimated starting minimum monthly payment of $20 gives us these whopping numbers:
TOTAL TIME UNTIL PAYOFF: 9 Years
TOTAL INTEREST PAID: $1,775
TOTAL INTEREST PAID AS A PERCENTAGE OF ORIGINAL BALANCE: 490%
source: Federal Reserve Bank Credit Card Repayment Calculator
source 2: Percentage Change Calculator
Here’s First Premier Bank’s new ad campaign:
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