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First Premier's $400-a-year credit card

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  • First Premier's $400-a-year credit card

    February 9, 2012

    Would you pay $400 a year to own a credit card?

    That's how much the First Premier Platinum card can easily wind up costing its customers, according to CardHub, a credit card-tracking website that has examined more than 1,000 credit card offers.

    First Premier's Platinum card, aimed at consumers with poor credit, not only boasts a sky-high 36% APR but it also comes loaded with some of the highest fees in the credit card industry, said Odysseas Papadimitriou, CEO of CardHub.

    First Premier, which has 2.6 million customers and sends solicitations to 1.5 million consumers each month, says it is helping consumers who would otherwise be rejected by most credit card issuers and therefore needs to price in risk by assessing high fees and interest rates.

    "All of our products are priced based on the risk associated with offering the product to these individuals, many who find themselves at the lower end of the credit scale," CEO Miles Beacom told CNNMoney in an email.

    While Papadimitriou agrees that fees and interest rates for high-risk customers should be steeper than they are for customers with good credit, he said the kind of fees First Premier charges are doing little to help customers who are already in a bad financial situation.

    "[First Premier] is claiming to be helping people with bad credit. How are you helping them by charging these outrageous costs of your products?" he said.
    6 new tools to help you get out of debt

    The nastiest fee is the "Credit Limit Increase Fee." Customers pay the fee each time their credit limit is increased. Papadimitriou said he knows of no other card company that charges such a fee.

    When First Premier increases a customer's credit limit, it charges 25% of the amount by which the limit is increased. Customers can apply for a credit limit increase any time, but can't receive an increase until they have been a customer for 13 months. Increases range between $100 and $200.

    Thousands of customers apply for credit limit increases every month, and about one quarter of requests are granted based on credit risk and a customer's performance within their current limit, First Premier said.

    When customers call to ask about a credit limit increase, First Premier representatives tell them the fee will be assessed if they are approved -- before processing the request, according to a customer service script that First Premier sent to CNNMoney. When customers apply for a limit increase online, they are provided with the same information then given the option to cancel their request, the card issuer said.

    If the cardholder's limit is raised by $200, they pay a $50 fee. Customers have 30 days following the credit limit increase to contact First Premier if they want to cancel the increase and get the fee refunded.

    Taking this and other fees and interest into consideration, a customer who gets a $200 credit limit hike and has a revolving balance of $500 would end up paying $453 per year to use First Premier's Platinum card after the first 13 months of owning it -- including $180 in interest with its 36% APR, a $50 credit limit increase fee, an annual fee of $49 and $174 in monthly fees. During the first year, the annual fee is $175 and monthly fees are waived.

    Carrying a balance of $322, which First Premier said is the average balance of its customers, would bring the total annual cost down but it would still be a steep $389.

    Even for customers with horrible credit, this is far too much to pay for credit, said Curtis Arnold, founder of credit card comparison website CardRatings.com. Customers start to become undesirable to typical credit card issuers when their scores dip into the low 600s, he said.

    While many issuers steer clear of this market, there are other options besides First Premier. Orchard Bank, for example, offers a Platinum credit card for consumers looking to rebuild their credit, said Arnold. The card comes with fees totaling $39 or $59 a year and an APR of 14.99% or 19.99%, depending on their credit. Like First Premier, Orchard also reports to the credit bureaus, allowing customers to improve their credit histories.

    "I worry that a lot of consumers get solicitations from [First Premier] and think it's their only option -- they say: 'At least this place is giving me a chance'," said Arnold. "But while [First Premier] is bragging about helping people back on their feet, they're in fact beating people when they're down."

    Another alternative to First Premier's credit card is a secured card. Secured cards come with much lower fees because they require the cardholder to deposit their own money into the account. Many banks issue them to their highest-risk customers instead of credit cards.

    Interestingly, First Premier offers a secured card with reasonable rates, but the card is not mentioned on the homepage of its website, said Papadimitriou. First Premier said it wants to highlight one product at a time on its website.
    'I dumped my bank!'

    First Premier has been experimenting with new cards, fees and interest rates ever since the Card Act was announced in 2009, which limited the fees the issuer could charge, First Premier said.

    In 2009, First Premier made headlines for offering a card with a 79.9% interest rate for a brief period of time. It later offered a card with a 59.9% APR, before getting rid of the card altogether last year. It is still offering a card with a high 49.9% rate.

    And while its fees may have taken different forms in recent years to meet the Card Act regulations, both Papadimitriou and Arnold agree that First Premier still takes the cake for offering the costliest credit cards in the industry.

    "I've looked at credit cards for over a decade, and these credit cards are downright scary," said Arnold. "They're definitely not the only bad apple out there, but I can't think of an issuer that is worse."

    By Blake Ellis @CNNMoney
    http://money.cnn.com/2012/02/09/pf/f...source=cnn_bin
    Last edited by Flamingo; 02-19-2012, 11:25 AM. Reason: Moved date
    The information provided is not, and should not be considered legal advice. All information provided is only informational and should be verified by a law practioner whenever possible. When confronted with legal issues contact an experienced attorney in your state who specializes in the area of law most directly called into question by your particular situation.

  • #2
    Originally posted by HRx View Post
    The nastiest fee is the "Credit Limit Increase Fee." Customers pay the fee each time their credit limit is increased. Papadimitriou said he knows of no other card company that charges such a fee.

    When First Premier increases a customer's credit limit, it charges 25% of the amount by which the limit is increased. Customers can apply for a credit limit increase any time, but can't receive an increase until they have been a customer for 13 months. Increases range between $100 and $200.

    Thousands of customers apply for credit limit increases every month, and about one quarter of requests are granted based on credit risk and a customer's performance within their current limit, First Premier said.

    When customers call to ask about a credit limit increase, First Premier representatives tell them the fee will be assessed if they are approved -- before processing the request, according to a customer service script that First Premier sent to CNNMoney. When customers apply for a limit increase online, they are provided with the same information then given the option to cancel their request, the card issuer said.
    Credit One does the same. Fee was $25 for an increase from $600 to $700.
    Filed CH7 9/24/2010, 341 on 10/28/2010, Disch.&Closed: 1/6/2011. FICO EX: 9/2: 672.
    FICO EQ: pre-filing: 573, After BK Public Record: 568, 10/3: 673.
    FICO TU: pre-filing: 589, After BK Public Record: 563, 9/2: 706.

    Comment


    • #3
      Got one of these offers in the mail the other day. $300 credit limit and yearly fee of $79.00. It went right in the trash.
      "I DECLARE BANKRUPTCY!" Ch 7 Filed 7/15/11 * 3 Minute 341 8/19/11 * Discharged 10/20/11

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      • #4
        Originally posted by Freddy03 View Post
        Got one of these offers in the mail the other day. $300 credit limit and yearly fee of $79.00. It went right in the trash.
        You know, I've got to start opening these envelopes and not just shred them blindly...might be worth getting a laugh or two out of "the great deals" that are being thrown around...

        Good luck to us all.
        No person in their right mind files a Ch. 13 with lien strip pro se. I have.Therefore, please consider me insane and clinically certifiable when reading my posts, and DO NOT take them as legal advice of any kind.Thank you.

        Comment


        • #5
          Freddy03

          You and I must be on the same mailing list. Filed it in the same place, as well.

          Comment


          • #6
            Dern I want one of those cards. HHMMmmm where did I put my lithium meds?
            If I knew it all, would I be here?? Hang in there = Retained attorney 8-06, Filed 12-28-07, Discharge 8-13-08, Finally CLOSED 11-3-09, 3-31-10 AP Dismissed, Informed by incompetent lawyer of CLOSED status, October 14, 2010.

            Comment


            • #7
              First Premier sent me an offer, not too long ago, and one of the qualifications for being approved, was you must have an active checking account? They must wanna debit consumers accounts whenever they feel like it!
              Filed: 5/22/07; 341 Hearing: 6/27/07;
              Confirmed: 8/13/07; DISCHARGED 4/17/2012

              Comment


              • #8
                Back when we were in active Chapter 13, we received a very similar offer as described above from Aspire Bank, which I don't believe is around anymore, so the above is nothing new - just a different lender. People are so freaked to get credit they don't take the time to add up the costs with this card and have to pay off fees all the time. That's insane.
                _________________________________________
                Filed 5 Year Chapter 13: April 2002
                Early Buy-Out: April 2006
                Discharge: August 2006

                "A credit card is a snake in your pocket"

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                • #9
                  $400 a year to have a $300-limit credit card? Such a deal! Where do I sign up for this wonderful bargain?

                  Comment


                  • #10
                    Outrageous. We are certainly water-boarding the wrong people.

                    Comment

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