Why Credit Card Regulations are Worthless

The problem with imposing new rules on credit card issuers is their ability to quickly circumvent them and come up with new ways to make money.

It’s quite evident if you look at what First Premier Bank, a subprime credit card issuer, has done recently to skirt the impending rule changes set to take effect on February 21, 2010 (Credit Card Bill of Rights).

The First Premier credit card typically comes with a minimum of $256 in fees during the first year for a $250 credit line, but because the new laws limit fees at 25 percent of a credit card’s total limit, it will be lowered.

Going forward, the bank will charge a $75 annual fee for a $300 credit line, but to make up for that lost profit, they’ve raised the APR from 9.9 percent to 79.9 percent.

That’s not a typo, it’s the highest APR tied to any credit card currently on the market, according to an industry analyst.

For cardholders with a $300 balance on the credit card, it equates to about $20 in monthly finance charges; assuming you pay $20 per month, you’d be looking at $315 in fees annually for a $300 credit line. Not a bad haul, eh?

First Premier is reportedly testing the new set-up to see how it works for them and their customers; the ultra-high APR is priced according to the “risk associated with this market.”

Even if they don’t stick to it, look out for similar tricks employed by credit card issuers to make up for any lost profit as a result of the rule changes.

Remember, the credit card issuers always win.

Related Topics:

1. Higher Fees, Rates May Be Downside of Credit Card Rule Changes
2. How Are Credit Card Minimum Payments Calculated?
3. More New Credit Card Rules Coming Soon
4. Costly ATM Fees Need to be Addressed
5. Credit Card Interest Rates May be Capped at 16 Percent