Beth sent me a link to this story this morning:
Basically, this bank used to charge $256 per year in fees on a credit card with a $250 credit limit. The new credit card laws limit fees to 25% of the credit limit. So,…the bank is now charging a $75 annual fee and is jacking up the interest rate to 79.9% on a maximum credit line of $300.
There’s no way around it, 79.9% is an extremely high APR. I ran a few numbers with a spreadsheet assuming the following:
January 1, 2009 – Get the card and immediately charge $300.
February 25, 2009 (and every following month on the 25th) – Make payment of $20.
On the statement closing date of December 25, 2009, the card would still have a balance of $284 (and this doesn’t even include the $75 card fee!).
Now, if this person were able to afford to pay $30 per month, the ending balance would be $137.
All I can say is at least the credit line is capped at $300. At least people can’t go out and charge up several thousand dollar’s worth of stuff.
Also, since the card carries a higher APR and a smaller annual fee rather than the much larger annual fee, the interest charges can be avoided by not carrying a balance.
I’m just thankful I’m not in a predicament that would require me to pay off $300 over time.
Thanks, Beth for the link!