CARD Act Kills ‘America’s Worst Credit Card’

NEW YORK (MainStreet) — The worst credit card in America is dead.

Subprime lender First Premier Bank announced earlier this week it was nixing its 59.9% APR Master Card.

And what killed the card was the CARD Act.

“It’s ironic, because the card came into existence because of the CARD Act,” Tim Chen, CEO of credit card ranking site NerdWallet.com, tells MainStreet. He explains that when the card was introduced by First Premier Bank in 2007, it touted a 9.9% APR, but also came with a minimum of $256 in first-year fees for a credit line of $250.

These fees went on to become illegal, thanks to the Credit Card Accountability, Responsibility and Disclosure Act of 2009, which says issuers can’t charge more than 25% of a card’s credit limit. Back in December, First Premier Bank lowered the card’s fees to $75 in the first year for a credit line of $300 while jacking up its interest rate to 79.9%.

As too many holders ran up the card, defaulting then going straight to charge-offs, the bank lowered the card’s APR to 59.9%, but the problem still persisted, leading First Premier to pull the plug on the card earlier this week. 

Under the CARD Act, high interest rates are permitted, but issuers are required to formally notify consumers 45 days in advance of a rate increase. Chen explained that this transparency makes cards with astronomical APRs popular with only a certain type of audience –the un-creditworthy who really have no business owning a card to begin with. 

While a higher APR – or the cardholders it attracts – can make it hard for issuers to make any money off the card in question, Chen doesn’t feel that more issuers will lower their APRs because the First Premier Bank card was so extreme.