Car loans and the interest rate you’ll receive are dependent on a lot of things, and your credit score is one of the most important. If you’re working to rebuild your credit and improve your credit score, you should be aware of super high interest rates on subprime credit cards.
For example, First Premier Bank, a subprime credit card company, is offering potential consumers an interest rate of 79.9 percent, up from the current 9.9 percent rate, the AP reports. This is similar to what most credit card issuers are doing right now before the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 goes into effect in February, which will limit abusive practices by credit card companies. Credit card companies are doubling and even tripling interest rates while they still can, leaving many borrowers stuck with a much higher minimum payment.
First Premier Bank’s credit card has a minimum of $256 in fees in the first year for a credit line of $250. But the new credit card act will cap fees at 25 percent of a card’s credit line. To get around the fee cap, the bank focuses its profit on interest rates, which aren’t capped by the new law. This is where the 79.9 percent APR comes from, reportedly the highest interest rate on the market currently.
First Premier Bank told the AP the 79.9 percent APR offer is a test and may or may not be implemented. Once the CARD Act goes into effect in February, the bank will have to stop offering its current card with the high fees. First Premier Bank told the AP that it needed to "price our product based on the risk associated with this market."
Although paying 79.9 percent interest on a credit card is outrageous, consumers with bad credit don’t have many options. Getting approved for an auto loan at a good interest rate requires a good credit score and a credit history. As consumers with bad credit work on increasing their credit score, they should watch their mail for interest rate increases like this one.