With key provisions of the new credit card laws slated to take effect later this month, companies that deal in “bad credit” credit cards are scrambling to find legal ways to gouge consumers with absurd credit card fees. One company has taken the initiative to create a credit card for bad credit to such extremes that it may very well have created the worst credit card in the history of credit cards. This is not hyperbole. This is the brave new world of post-CARD Act subprime credit card lending.
This “bad credit” credit card offer that puts all other subprime credit cards to shame is called the Centennial® credit card. When you arrive at this card’s application page, you might overlook the small link to the terms and conditions. If you do, you’re in for a nasty surprise. The largest print on the terms and conditions page announces a 23.9% APR, a high, but not unreasonable interest rate for people with bad credit. Unfortunately, this is the only reasonable thing about this offer.
The next area of the application covers fees: a $95 processing fee and a $75 annual fee. According to the application, “You must pay the $95.00 Processing Fee in full before your Credit Account will be opened and you have access to your available credit.” In other words, you can’t use your credit card until you’ve paid them $95.
With the $95 dollars paid, you’ll finally be able to use your available credit line. Since the annual fee of $75 will be reduced from your initial credit limit of $300, you’ll now have spent $170 to have access to $225 in credit at a 23.9% interest rate. And you’ll already be in debt $75.
During the next year, paying on time and proving to be a credit-worthy customer will pay off big time: for First PREMIER® Bank in Sioux Falls, SD. According to the terms and conditions, which are less than clear, accounts are eligible for credit limit increases after 13 months. However, “each time your Account is eligible for and approved for an unsecured credit limit increase, a Credit Limit Increase Fee in the amount of 50% of the amount of the credit limit increase will be assessed to your account.”
In other words, the credit card company can increase your credit limit and then increase your debt to them by as much as it wants-and, judging by the loose language involved, without asking you if you are interested. While the terms state that, “This may or may not change in the future,” they are clear in stating that, “This fee is automatically assessed upon approval of your credit limit increase, which could be as soon as 13 months. This fee is a FINANCE CHARGE.”
There are other issues with this “bad credit” credit card worthy of exploration. But I think the writing is on the wall. Run, don’t walk from this offer. And be prepared for other credit card companies to impose similarly harsh terms on subprime credit card applicants.
-Jeffrey Weber
Editor’s Note: For additional insights about credit card options for people with prior credit problems, please see the article Smart Tips to Repair Bad Credit.
You can review the terms and conditions of the Centennial credit card application explored in this article here. Terms and conditions change frequently. The information in this article is accurate as of February 2nd, 2010 but may change at any time.
