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GASP! A Credit Card with an APR of Over 700%!

By JLP | January 15, 2010

Check this out: Credit Reform and My New 703.8% Card

Now before you say, “Damn! That’s a high APR,” read this:

Department Stores National Bank, which issues the card, charges a “minimum interest charge.” On my average daily balance of $3.41, that minimum charge worked out to “an actual annual percentage rate” of 703.80%. (Part of the impact of last year’s credit reform is that the issuer had to disclose that shocker on the statement, while also noting that the card’s normal APR is 24.5%.)

Did you see it? HER AVERAGE DAILY BALANCE WAS $3.41! She conveniently leaves out what the interest charge was, which couldn’t have been more than a few dollars. I’m not sure why she’s being charged interest if she’s not carrying a balance.

Besides that, what’s she doing opening a department store credit card during Christmas? Isn’t that one of things you’re not supposed to do?

Just curious. Read the rest of the article. There’s all kinds of good material there. Oh, and the name of her column is “Devil in the Details.” Hahaha…

Topics: Credit Cards | 5 Comments »


5 Responses to “GASP! A Credit Card with an APR of Over 700%!”

  1. BG Says:
    January 15th, 2010 at 5:06 pm

    Damn! That’s a high APR!

    This is what happens when you take ‘fees’ (or other “fixed” finance charges) and convert them into interest rates.

    Its helpful when comparing mortgages this way (rates + costs), but when you are talking about a minuscule $2 minimum finance charge, while holding a $3.41 balance it doesn’t make as much sense.

    Besides the yearly APR is actually closer to 25,000% (instead of the reported 700%). 25k% yearly APR is 58% effective monthly apr, which would give you the $2 ‘fee’ on $3.41 debt.

  2. Dreamer Says:
    January 15th, 2010 at 7:31 pm

    Is everything going okay for you? This sort of post is a little vitriolic, and definitely not your style. Normally, you would have ignored it, and found something more relevant or meatier to post about, or ignored that part and focused on the other parts of the post you preferred.

    Seems like you’re taking it out on this post for some reason.

  3. JLP Says:
    January 15th, 2010 at 7:40 pm

    Dreamer,

    I’m fine. Thanks for asking.

    This post struck a cord with me because it’s misleading. The outrageous APR this woman cites is based on a really low balance and minimum interest charges. That was my point.

  4. Andrew Says:
    January 16th, 2010 at 8:18 am

    If you look at monthly service fees or annual fees, you get the same problem.
    The same misleading occurs with short term loans like direct deposit and payday. What do you gain by annualizing a two week loan?

  5. BG Says:
    January 16th, 2010 at 10:36 am

    What is odd is that the bank is required to calculate this type of APR and state it on the bill. The original poster actually received a bank statement that said it had an effective annual APR of 703.8%.

    ‘Credit reform demands that they disclose your astounding “actual” APR on the statement…’

    Granted a lot of people are going to be receiving these types of bills, and will be calling the bank outraged — Oh well, that’s what happens when you deal with the public (and the public doesn’t know math).

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