Customer interest in 79.9% credit card is 'phenomenal'

Readers’ responses to our post about a credit card with a 79.9% interest rate included more than a smidge of outrage. “It is almost time for Americans to pay off all credit card debt and then only pay cash. These people have given new meaning to the word GREED,” “pghkid” wrote.

• Bing: Credit card horror stories

But how is the new subprime card offer mailed by Premier Bankcard going over with prospective customers? Premier hasn’t said how many applications were distributed, but CreditCards.com reports:

(Miles Beacom, CEO of Premier Bankcard) called the response "phenomenal," adding 2% of people receiving the offers have applied for the cards. Their normal response rate is 1% to 1.2%, he says. "It's double what our normal product was."

While that may seem nuts, it’s actually understandable.

Many people have difficulty getting regular credit cards. An estimated 50 million to 60 million people have no or very little credit.

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The 79.9% interest card is actually an improvement over  another Premier subprime card -- the Centennial Gold MasterCard -- which comes with a 9.9% interest rate, about $250 in fees and a $300 or so credit limit. MSN Money columnist Liz Pulliam Weston named the Centennial Gold MasterCard “the worst subprime card.” 

However, new credit card rules that take effect in February limit the upfront fees on subprime cards to 25% of the credit limit and will make the Centennial Gold fee structure obsolete. With a fee of only 75 bucks and a $300 credit limit, the 79.9% card could be a huge savings -- if you don’t carry a balance from month to month.

Premier Bankcard says the high interest rate is necessary because of the risk of extending credit to those who haven’t successfully managed their money in the past. But, before you mail in that application, consider there are other ways to build a credit score.

• Apply for a secured credit card. The credit limit is the amount you deposit upfront. But watch out for fees, and make sure the card issuer reports to the three major credit bureaus.
• Consider another subprime card with a lower interest rate.
• Get a store or gas card and use it responsibly.
• Pay all of your bills on time.

If you got an offer in the mail for a card with a 79.9% interest rate, would you apply? Would you be responsible and pay off the entire balance each month?

Related reading:

• Build credit without credit cards
• Why can’t I get a credit card?
• Banks get picky about credit cards
• Life without credit: Tough and expensive