In your Wallet?

[HFWR]

I hope you get a set of steak knives with this...

Credit card had a 79.9% APR from First Premier Bank - Feb. 7, 2011

The card proved popular with consumers, said First Premier Bankcard CEO Miles Beacom, but the performance was bad: "A lot of the people ran up the card, defaulted and went directly to charge off."

There is a huge -- and growing -- need for cards serving customers with "less than perfect credit," Beacom said. However, he added, the company is now more cautious due to the Card Act, so it is only opening about 50,000 accounts a month.

...more than half of them carry a monthly balance.

 

[freebird5825]

Steak knives? STEAK KNIVES?
I would insist on a year supply of fresh lobster delivered to my door for that APR.

 

[W2R]

I'm sure SOMEBODY is fool enough to sign up for that card, amazing as that seems.

Like P.T. Barnum is reputed to have said, "There's a sucker born every minute." In my opinion most of them are busily signing up for high interest rate credit cards, getting payday loans, and buying "rent to own" furniture. I'm just so glad that I am not caught up in all of that.

 

[ERD50]

There is a huge -- and growing -- need for cards serving customers with "less than perfect credit," Beacom said. ... so it is only opening about 50,000 accounts a month.

Wow, that's like saying there is a huge -- and growing -- need for [-]cards[/-] bartenders serving customers with "less than perfect [-]credit[/-] ability to control their alcoholism,".

Just what someone with poor credit needs, to maintain a balance on a card with a 79.9% APR (hey - it sounds so much better than 80% APR!).

Needs to be some education out there. These people would find other ways to get into trouble if these cards are pulled away.

-ERD50

 

[Texas Proud]

Wow, that's like saying there is a huge -- and growing -- need for [-]cards[/-] bartenders serving customers with "less than perfect [-]credit[/-] ability to control their alcoholism,".

Just what someone with poor credit needs, to maintain a balance on a card with a 79.9% APR (hey - it sounds so much better than 80% APR!).

Needs to be some education out there. These people would find other ways to get into trouble if these cards are pulled away.

-ERD50

As bad as this rate is... it is still cheaper than going to the local [-]mafia lender[/-] pay day loan store... I have read with fees etc. some rates can be as high as 1,000%...

But then again... we did not calcualte the rate with fees on this card... maybe it is as bad...

 

[samclem]

As bad as this rate is... it is still cheaper than going to the local [-]mafia lender[/-] pay day loan store... I have read with fees etc. some rates can be as high as 1,000%...

But then again... we did not calcualte the rate with fees on this card... maybe it is as bad...

The payday lenders are bad, but I'm not sure they are quite as bad as their opponents claim. Those "500%" interest claims (or whatever) are a little deceiving. These are short term loans. Go to a bank, tell them you need to borrow $200 for ten days, and if they charge you a $30 origination fee (paperwork ain't free) and 7% APR, that equates to over 500% APR. For folks in this situation, these payday jackals cost less than bouncing a check or getting the electricity turned off or the car repossessed.

Do people renew the loans and keep paying the outrageous fees for months? Sometimes. Is it better than getting a loan from someone who will break your bones if you can't pay? Probably. Will the ignorant and foolish always be among us? Yes.

 

[bbbamI]

Hey big boy...do ya love me or is that an overly inflated APR credit card in your pocket...?

 

[braumeister]

Like P.T. Barnum is reputed to have said, "There's a sucker born every minute."

No, no, no! You have it completely backward!

We're dealing with "a very select clientele," only one of whom is born in any given minute.

 

[BTravlin]

Do they buy you dinner first?

 

[Purron]

Sick Suze on 'em...

YouTube - Suze Orman "Denied" Mega Mix

 

[Walt34]

I saw that article and wondered who would be fool enough to sign up for that. Then I remembered the idiot friends of one SIL. These are the folks who were $700k in debt and at retirement age. At one point the wife got a car title loan to take a trip that she "needed". And this woman is a retired math teacher! Who was it said - I think Larry the Cable Guy - "Ya can't teach stupid".

So apparently there is a market for it.

P.S. They're no longer $700k in debt. They lost one house to a short sale and are now only underwater on one. Well, I guess that's an improvement.

 

[Sarah in SC]

Speaking of payday lenders, heard this on my NPR podcast of the day yesterday. Scumbuckets!
Tribal Land Helps Payday Lenders Skirt State Laws : NPR

 

[traineeinvestor]

And somewhere out there is a banker wanting to securitise the receivables, get an AAA credit rating on the resulting product and sell it to your pension fund.

 

[ERD50]

Speaking of payday lenders, heard this on my NPR podcast of the day yesterday. Scumbuckets!
Tribal Land Helps Payday Lenders Skirt State Laws : NPR

Well, the tribes seem to be endorsing this, so I don't know what to think, really.

As far as 'scumbags', I think we could also apply that term to the journalists that cover these stories. As samclem mentioned, pointing out the 'annual rate' is just engaging in sensationalism. From that article:

In a typical transaction, a customer might pay a $50 finance charge to borrow $300, which is scheduled to be paid back two weeks later, when the customer's next paycheck comes around. Hudson says the cost of these loans often works out to "annual interest rates of 400 percent or more."

$50 charge seems pretty reasonable to me, all things considered. The fact that it comes out to an annualized 433% is not relevant, it isn't a long term loan. Now, if people use it as a long term loan, that is a problem for them - but should the product be banned? Some people might be legitimately helped by getting one, maybe to get a car fixed so they can get to work and not lose their job? $50 would be cheap, no?

Or, if these are so bad, I'd like to see a group of concerned people fund a loan system for these people with their own money. What rates would they charge? Even a $3 service charge ends up being 26% - scumbag, usury rates! Savings accounts are only paying 1%!

Who is going to do this for $3~$4 a pop?

-ERD50

 

[Sarah in SC]

I see your point ERD, but I'll stick to my scumbuckets label when it comes to payday lending.
In our state, these folks prey, like our state lottery, on folks who are bad at math. And they set up most of their shops just outside the gates of the military bases.
I've talked to some folks whose short term loans turn into a nightmarish cycle of new payday loans to cover the last ones, tacking fees and interest on those already usury rates.
The fact that tribes are promoting this, is to me, at least as reprehensible as our states promoting scratch-off lottery tickets.

 

[Texas Proud]

ERD...

I agree with Sarah on this... because mostly the people who use this become addicted to them.... also, from what I have read the fee is more like 25% to 33% of the borrowed amount.

They showed on one of the new magazines that a good percent of the people roll the loans over and might even increase it...

So an extreme example... you borrow $300 for two weeks and the fee is 25%.... in two weeks you roll over the $375 for another two weeks... after one year you will owe over $99K... pretty expensive for a $300 loan...

This is worse than most CC companies for the person to have the ability to get out of debt...


IMO, these firms do more harm than good... sure, there are people who have to get some funds to fix the car or something else to keep the job or keep out of jail... but the others just are digging themselves a hole...

 

[samclem]

Two parties reaching a voluntary agreement.

If we feel we must intervene as a society, then how about some regs on the use of the product, qualification of lendee, etc. I think everyone can agree that there are cases when $300 today, even at a fee of $50, will save the recipient much more than that in future expenses and be of genuine benefit.

To the degree we make this activity illegal, we drive it underground. People wouldn't be going to these jackals if they had other legal places to get a loan. Increased loan-sharking gives resources to some very bad actors, increases lawlessness for everyone, and deprives the state of tax revenues and any influence at all in how these contracts are written, consumer education, limits on debt collection, etc.

I'm hoping the tribes are getting a good cut of the action. A little payback for some previous "agreements" that weren't voluntary and which weren't honored.

 

[ziggy29]

Two parties reaching a voluntary agreement.

True, which is why the combination of full disclosure and consumer education are so important and *should* be the first line of defense before more heavy-handed legislation.

 

[Texas Proud]

Two parties reaching a voluntary agreement.

If we feel we must intervene as a society, then how about some regs on the use of the product, qualification of lendee, etc. I think everyone can agree that there are cases when $300 today, even at a fee of $50, will save the recipient much more than that in future expenses and be of genuine benefit.

To the degree we make this activity illegal, we drive it underground. People wouldn't be going to these jackals if they had other legal places to get a loan. Increased loan-sharking gives resources to some very bad actors, increases lawlessness for everyone, and deprives the state of tax revenues and any influence at all in how these contracts are written, consumer education, limits on debt collection, etc.

I'm hoping the tribes are getting a good cut of the action. A little payback for some previous "agreements" that weren't voluntary and which weren't honored.

I do not disagree... I do not want to make it illegal... I would much rather have it regulated better...

Remember way back when... there were usury laws... they said 'this is the highest rate you can charge'... but that went away when it was determined that you can put a bank in Deleware and charge whatever rate you want...

But if a bank is limited to the fees they can charge for overdrafts and the fees they can charge for other items... then these places should have a maximum fee... I would also have some kind of rollover limit...


I will say... it really does not affect me, so I am not an advocate of getting this done... but I still think it is unethical...