Credit card rates near 80 percent in some cases
Since the beginning of the recent economic recession, credit card companies have attempted to extend new credit lines to the large number of Americans who experienced defaults and charge offs over the past few years.
However, one way the companies are ensuring against future late payments and defaulted accounts is by upping the introductory interest rate, or embedding language in contracts that allows for future APR escalations on credit card debt.
For example, First Premier Bank recently launched a new credit card with a 79.9 percent interest rate, CNN Money reports. However, the rates proved to be too high for many consumers, who ended up defaulting on their accounts, leading the lender to search for another percentage.
“We also tested [interest rates] at 23 percent, 33 percent, 45 percent, but 59.9 percent is the one that shows the best performance and where the organization can market the product,” First Premier Bankcard cheif executive officer Miles Beacom told the news source.
Despite the sky-high rates, nearly 700,000 customers have signed up for the account and more than half carry a balance, according to CNN.
A secured credit card may prove to be a better option than a credit line with an interest rate of nearly 60 percent. These cards provide consumers with poor credit histories the ability to work toward lower rates.