79.9% Interest Rate Actually Lowers Effective APR for some Credit Card Issuers
Adam Levitin at Credit Slips takes an interesting look at some of the changes subprime credit card issuers are making in order to keep profits up while complying with the Credit CARD Act. It's not surprising that lenders are already applying all the creativity they can hire to finding ways to work around the new law and keep profits high, but Levitin does turn up one piece of information that may come as a surprise to many of our clients (and maybe even many of us): First Premier Bank's new 79.9% interest rate, combined with lower fees, actually makes the card cheaper to use than the old, 9.9% version.
It's an excellent illustration of just how misleading that bold print can be, and well worth a read. While it appears that the high-risk, high-cost issuers are going to find a way to keep on doing what they do, perhaps this change will at least make the costs more obvious to consumers up front.
