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The credit card with a 59.9% interest rate

Why are the interest rates charged by credit cards higher than they've been in recent years?

By Karen Datko Oct 29, 2010 5:51PM

A Budgets are Sexy post we featured here asked readers to fill in the blank: I wish my credit card had _________. We strongly suspect no one answered "a 59.9% interest rate."

That's the rate you'll get if you apply for a First Premier Centennial Classic credit card. The bank just abolished its lower, 23.9% annual percentage rate for new Centennial Classic customers, so all will get the 59.9% rate, says.


(You may recall First Premier, parent of the 79.9% credit card. Also, Consumers Union recently named the First Premier Bank MasterCard the nation's worst credit card. Congratulations.)

First Premier's decision to offer only the higher rate was enough to raise the overall average APR for new U.S. credit cards to 14.69% in's weekly survey, up from 14.37% last week. It's now "the second highest level on record since began tracking APRs in 2007," the website says -- this while mortgage rates are at lows not seen since the 1950s. What gives?


There are two parts to our explanation.


Part One

The Credit CARD Act limits fees charged during the first year a card is in use to no more than 25% of the credit limit. To get around that rule, some cards, like First Premier's, began charging a processing fee on new card applications -- imposed before the card could be used.


Clever, eh? Now the Fed has proposed new rules to close that loophole. Thus, the speculation is, First Premier did away with the 23.9% rate because the income from the processing fee won't be available in the future.


Of course, people with good credit scores can find better rates. According to, the average rate for new low-interest cards is 11.93%, compared with 12.11% six months ago. For new cash-back cards, it's 12.7%, up from 12.57%. For instant-approval cards, the current average is 16.49%, much lower than the 18.41% average six months earlier.


Part Two

But why are the rates on cards so high? Banks that specialize in lending to people with poor credit aren't the only ones raising rates. For instance, Capital One recently increased the APR on new No Hassle Cash Rewards cards for people with top-notch credit, said. In fact, credit card rates are high for everyone. reports:

The fixed-interest rate average for credit cards has held steady for four weeks at 13.76%, but the mean variable rate continues to climb. This week it reached a new all-time high of 14.51% in the Bankrate survey, a hike of 11 basis points since last week. Variable rates have averaged above 14% since April.

It doesn't seem fair, particularly when credit card charge-offs and delinquencies are on the decline. For the sake of comparison, note that the average rate for a 30-year fixed-rate mortgage this week was 4.23%. And just how much is your savings account earning


Credit card issuers raise interest rates on cards because they can. While the CARD Act set limits on when rates can increase, it didn't limit how high they can go. Forced to relinquish major fee revenues by the new law, issuers are going to seek that money elsewhere. Philip Shenon wrote at The Daily Beast:

Seeking to recoup the tens of billions of dollars in annual revenue they lost as a result of the new law, credit card companies have jacked up overall interest rates on plastic in the last year and slashed credit lines even for customers in good standing. Industry studies show that the average credit card interest rate is slightly above 14.5% a year, up from about 13% in 2009.

What can you do if you have a high APR and the issuer declines your request for a lower rate?

  • People with good credit can qualify for a 0% balance transfer, which are more widely available than they've been in some time. "And some issuers are even rolling out deals offering zero percent interest on balance transfers and new purchases for up to a year," Bankrate says, although many charge a balance-transfer fee of 3% or 4%.
  • Pay off your debt as quickly as possible, and never carry a balance again.

Also, don't apply for high-interest subprime cards.


"Look for a secured card and put the money down as a deposit for a small line of credit rather than nonrefundable fees and one of the highest credit card interest rates known to man," Linda Sherry of Consumer Action told "This is why we need a national usury cap on credit card rates." 


More from MSN Money:

Nov 1, 2010 8:26AM
Live within your means, don't spend money you don't have, pay the card off every month, and your CC interest rate is 0.0!  How hard is this to understand?
Oct 31, 2010 10:24AM
So much for financial reform.  Credit card interest rates are at their highest in years.

Consumers are being taken advantage of with no one looking out for the little guy.  The big banks win and win and win.
Nov 1, 2010 8:23AM
what did we do prior to credit cards?? If 59.9% is staggering why would anyone even consider using it or them for that matter.
Nov 1, 2010 1:15PM
Pay the darn thing off every month----------No interest.
Nov 1, 2010 12:39PM
Just another reason why more & more folks each day are turning to Credit Unions.
Nov 1, 2010 2:04PM
Forget about credit cards.  Use cash and debit cards.  The only way to exercise our leverage as consumers is to walk away when the "big banks" try to screw us.  Once we do that the credit card companies will drop their rates to more reasonable levels for everyone. Its Economics 101, when demand falls off, prices come down.  It works for credit cards just like everything else.  F%#K the credit card companies!
Nov 1, 2010 12:15PM

These are high risk people getting high interest rates.  If you don't like it why don't you loan them the money. 

Nov 1, 2010 9:32AM
Pay day loan centers charge over 400% interest rate.  Wonder why nobody complains about that?
Nov 1, 2010 1:39PM
All of you are missing the "hidden" point to the article.  Government passes credit law and the credit rates go up!  I can't wait to see what healthcare costs do to the poorest people amoung us!  LOL, thank you Big Brother Uncle Sam.
Nov 1, 2010 12:07PM
Big banks and congress sleep together so it doesn't matter which party win the elections.  Best to just bend over and smile.
Nov 1, 2010 4:28PM
Everytime I read an article like this I sit stupified as to why intelligent people are still using credit cards. It's beyond me
Nov 1, 2010 3:58PM

If you "need" a credit card...Ask yourself if you want to throw away thousands of dollars for interest and a myriad of other charges. If you love to throw money away get a credit card. If not you can use a debit card for everything that a credit card is used for.

Nov 1, 2010 1:08PM
What happened to all the fanfare when the credit card "reform" was introduced and implemented? Weren't we told that the big bad credit card companies will have to tow the line and give the consumers more breathing room and won't be allowed to charge excessively? Looks like w, the consumers, got the short end of the stick on this one.
Nov 1, 2010 10:11AM
the best c.c anyone can have is the CASH one.For what one credit card charges in interest alone, you can buy tons of money orders and stamps and pay your bills that way. WE DO NOT NEED CREDIT CARDS FOR ANYTHING. If you do not have the money to buy what you want now, wait until you do, you will sleep a lot better.What this people want to charge now for one of their c.c is Organize Crime style of doing business. Stay away from them and live a worry free life.

of course rates are going to go up when you cut out a fee generating source (i.e. capping fees and/or cutting overlimit charges).   credit card companies do not exist as non-profits.  if you cut off one way to make a profit, the companies will figure out another way to make a profit. 

Nov 1, 2010 9:32AM
If I had a credit card, and somene charged me 79% interest, I think I would be looking for this someone and have a little talk with them, because this is nothing but greed, I say, america do not pay these idiots that charge this big interest, the fact is 23% interest is to much, when are we going to get leadership in this country to stop this sort of thing, we might as well go back to the 30's when al capone was here. Kennedy and Reagan would not have put up with these hoodlums that are charging this kind of rates.
Nov 1, 2010 7:34AM
This is the new world of the corporation. Anything goes. Seems everyone wants smaller gov. but when there is a problem it is "we need a regulation"America is getting what it deserves.
Nov 1, 2010 11:06AM
60 % is nothing. My HOA charges 21.5% per month, every month that your dues are late. That's like 260% per year. But they don't come under any laws because they are not lending you anything. But to me that's no excuse to to ream people who are having a hard time.
Nov 1, 2010 8:34AM
banks and big biz own this country the government are owned by banks and big biz they do what they want screw the american people if people were smart they would do what they did in the real world put there money in the mattress and watch the thiefs make a law where you dont have a choise and if you think this is bad wait till the next bubble bursts and that WILL be insurance then watch out
Nov 1, 2010 6:36PM
Wow, wish we could draw 59% interest on our IRAs!  That would be awesome.  Anyone who would use a credit card with that kind of interest rate is just plain dumb.
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