Credit card companies have long charged interest rates around 30 percent for people who miss payments or who have poor credit in general. However, the federal Credit CARD Act, which is already partially in effect, will sharply limit the ways in which lenders can impose such costs on their borrowers, which has led some companies to get increasingly creative in their search for new revenues.
One example that recently made national news is a card offered to subprime borrowers by First Premier Bank in South Dakota. A report in the Sioux Falls Argus Leader notes that the card carries a 79.9 percent interest rate and that the company is comparing its product to the elevated insurance rates that people with bad driving records have to pay.
The company’s CEO was also quoted by the newspaper as saying that over time, consumers with a solid payment track record will see their borrowing cost come down significantly. However, the card and its interest rate have also drawn the concern of consumer advocates who are worried about predatory lending practices.
Overall, people may have other options when it comes to repairing their credit score. The most important step is to start making all payments on time and to pay down balances to about one-third of a given credit limit.
Also, some people may consider applying for credit card accounts offered by large retailers, although consumer advocates have warned that these tend to come with high interest rates as well. Still, for those struggling with debt and credit problems, options are likely to remain limited for the foreseeable future.
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