I came across an article that told a pretty outrageous story about a guy who received his new credit card in the mail. It was for a First Premiere MasterCard. He looked at his new terms and conditions and it had an interest rate of 79% and no, that is not a misprint. I decided that I would go online and check out this card. I didn’t find a 79% interest rate. I doubt that they advertize that one. However, I found something much worse.

Now keep in mind that an interest rate represents the cost of holding debt. If you add in fees and the interest rate, you would get the total cost of holding the card. That would be the ultimate interest rate.

If you take out this card, you get charged these fees and interest rates:

9% interest rate
$29 one time account set up fee
$99 one time program fee
$48 annual fee
$7 monthly service fee
$25 if they decide to raise your credit limit

Your initial credit limit is $250. When you receive your first bill, you would have a balance of $185. If you kept the card for the full year, you would have paid $268 in fees plus interest of 9.9%. If you say yes on the phone to the card, you are automatically on the hook for $185. If you don’t pay it, you are eventually going to default and go into debt collections. As long as you keep the card open because you might not be able to pay the $185, you will be charged $7 a month.

Unfortunately, these cards are typically what people with low credit scores have to resort to in order to establish credit. If you really figured out the total interest, it would easily surpass well over 100%. That would be if there were any credit limit left over after the fees. Do you think that we need some reform? The politicians allow this type of thing to happen.

Tags: Bob Brooks, credit card, credit limit, credit scores, Debt, debt collections, interest rates, MasterCard