Photo Credit:[South Dakota] doesn't have any limits on the interest banks and credit card issuers are allowed to charge. Which gets you things like this: A card offered by Premier Bank, based in Sioux Falls, carrying an annual interest rate of 79.9 percent. Perfectly legal [Kai Ryssdal, final note, Marketplace, 2009.10.15].
Ah, nothing like a moral basis for the South Dakota economy...
I sure hope that photo graphic is hypothetical, not actual.
ReplyDeleteIf you read the actual comment, "A couple of months ago we did a story on how South Dakota has become the place for credit card companies to set up shop. That's in large part because the state doesn't have any limits on the interest banks and credit card issuers are allowed to charge. Which gets you things like this: A card offered by Premier Bank, based in Sioux Falls, carrying an annual interest rate of 79.9 percent. Perfectly legal."
You don't know if this was a legitimate offer, or something that was manipulated as a possibility with our lack of interest limits for credit cards in South Dakota.
All I know is I've received notices from Citibank and Chase in the past week reducing my credit limit, adding fees and placing limits on my previous credit freedoms, along with a host of account changes, all mandated to protect me by our Democratic Congress and President.
I guess I wasn't aware protection was needed.
Back up, Rod. Check the other link the the original story at NBC San Diego. Reporter Bob Hansen checked. He gives no indication the bank card offer is a fraud. He reports a call to Premier Bank confirmed the offered rate. Sounds pretty legit to me, but I remain open to evidence to the contrary. (Premier Bank isn't providing any; they would not return the reporter's calls.)
ReplyDeleteThe story is pretty simple and darned hard to spin: Premier Bank is offering credit cards at 79.9% interest.
But dang: if people had been this skeptical about the news back in 2002, we might not have troops in Iraq right now.
This is why I only have one credit card, which I have not used and is locked away somewhere in my papers. I know where, but I'm not telling anyone.
ReplyDeleteBasically, if you can't afford it, don't buy it.
The only plastic I'll use is a debit card.
Its a real offer, which would be fine if Premier bore the full weight of moral hazard. Reasonable regulation would be allowing consumers to take lenders to court to determine if the contract was ever reasonable. If it is found that a bank offered $20,000 when the consumer was only ever capable, even at poverty line living standards and paying the minimum on every older existing debt, of paying back $8,000 in say 10 years. The bank should be on the hook for the rest. Oops for them. I doesn't bother me if I had to get a credit line of 79.9 interest if the limit was $500. I could pay it without much heartache. I have more of a problem with a $20,000 credit line at 5%. The interest might sound nice but there is no way in heck I could pay that off in 10 years.
ReplyDeleteIt isn't wrong to demand as high a return as you think the risk warrants: 75%, 90%. It is wrong to change that interest later on if the bank thinks the risk has changed. That should be their problem. Close the credit line, but don't demand I cough up more for the money already lent me. If that nice 5% interest rate jumps to 12% or 18% because I start to have trouble making payments I'm in a hole that was never part of the bargain.
It is as much the lender's responsibility to determine if a contract can be fulfilled as the consumer. (although a debt is a debt, I would turn the discharged debt into a zero interest fine, maybe to go into the FDIC fund)
Regarding rate increases (7News):
ReplyDelete"New federal rules are supposed to protect you from high credit card fees and surprise rate hikes, but before they go into effect, lawmakers said some credit card companies are rushing to raise rates while they still can."
They are also changing their terms to variable so they can do what they want.
By the way, Rod, not one of the changes to your credit card that you mentioned was mandated by Congress. Your credit card company is rushing to take away your "credit freedom" before the law passed by Congress kicks in in full force. Believe me, if your freedom is in peril, you will do much better to throw in with Congress than with Premier Bank and the other usurers.
ReplyDeleteI have no doubt this is a real offer. I have a couple of friends who work for Premier.
ReplyDeleteNote though, that such offers are only given to people with horrible credit and are now trying to rebuild their credit. The intent of such a card is to force the individual not to carry a balance. The use and consistent monthly payments help rebuild the individual's credit. You could do the same thing with a collateralized card, but many people don't have the up front cash to put down for such a card.
I don't really consider high interest rates to be evil, it just represents a person's credit worthiness. However, I do have problems with outrageous fees and percentage rates that can be adjusted arbitrarily.
Unlike anything the government does, one is at liberty to reject this offer...
ReplyDeletePoint: free market
Kind regards,
David
Loan sharks love to hide behind principle.
ReplyDeletePornographers and prostitutes can make the same claim.