I've never been a big fan of banks. I've always thought they were in business to rip off their customers. But I was prepared to extend them some leeway when several announced they planned to pay back their bailout money. Perhaps the banks weren't cold-hearted ripoff merchants after all.
Enter First Premier and their 79.9% APR credit card. Yes, that's not a typo. Seventy Nine Point Nine Percent APR. Have they got a deal for you?
Just when you thought it couldn't get worse - it does.
Not only does this bank want to charge you 0.1% off a whopping eighty percent interest PER YEAR, but there's also the added bonus of a $75 annual fee on top of that. Who could possibly find fault with that?
So let's run a few figures.
Let's assume for arguments sake that you're given a $1000 credit card. You max it the first week, but then your financial situation gets better. In this scenario, we pay the entire card off over twelve months. At 79.9% APR this means the monthly payment is $123.89 in order to pay the balance off in twelve months. The bank makes $468.68 in interest on it's $1000 loan.
Now let's look at it from a pessimistic point of view.
Let's say you can't make $123.89 a month. I went to a credit card calculator to see how much you'd have to pay per month in order to pay the card off at all.
$50 a month? No deal. Paying $50 a month you will never be able to pay off sufficient of the actual debt to ever clear both principal and interest.
$60 a month? Still can't clear both principal and interest. You would still be paying off the bank literally for ever.
No, the minimum amount you would have to pay each month, every month in order to clear both the debt and the principal is $67.38. And that's assuming you NEVER wrack up a single cent of further debt on the card. Paying $67.38 a month will take you six years to pay that initial $1000 back.
What does the bank make off that? $3851.36 - from a $1000 loan.
Does anybody still think the banking industry gives a damn about their "customers"?