December 18, 2009
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News: First Premier Charges 79.9% Interest
If your credit card company hit you with one of those abusive interest rates of near 30 percent, this may make you feel somewhat better. First Premier Bank in Sioux Falls, South Dakota has a new credit card product that charges an outrageous 79.9 percent interest rate. The card is targeted toward subprime customers with damaged credit and unable to qualify for a traditional card. New card reform laws that become effective in February 2010 prohibit card fees in access of 25 percent. It presents a problem for First Premier because previously the bank offered the bad credit card with a $250 credit limit, 9.9 percent interest, and a $256 annual fee. New terms offer the card with a $300 credit limit and 79.9 percent interest.
Dana Dykhouse, Chief Executive of First Premier said the 79.9 percent interest rate credit card is being issued on a limited basis for testing. Consumer advocates are outraged by the card and fear the bank will take advantage of Americans who are already struggling to meet the needs of their family. However, Dykhouse says he believes there is a demand for the product by high risk consumers who are looking to rebuild their credit. The bank assimilates the high interest credit card with an individual with a bad driving record who is forced to pay high insurance premiums until their driving record improves. Likewise, according to Dykhouse, if a bad credit customer makes his payment on time for a number of months, his interest rate will gradually decline.
Analysts say the First Premier bad-credit credit card interest rate is the highest in the market. The national average variable interest rate is 11.68 percent. The card will end up costing subprime customers $70 to $80 a year, which First Premier feels is a small fee compared to the benefits of re-establishing credit. Dykhouse blames the new legislation for the challenges to both lenders and consumers trying to clear up credit problems.