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Thread: Is this really possible ?

  1. #1
    Veteran Member dishis's Avatar
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    Default Is this really possible ?

    I stumbled across this, but I can't image it would be legal. 300% interest on a new sears card ?

    http://www.retail-worker.com/forum/viewtopic.php?t=7868

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    Featured Member Vamp's Avatar
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    Default Re: Is this really possible ?

    http://www.bankrate.com/brm/news/cc/20020814f.asp

    "Less than half of all U.S. states bother to cap credit card interest rates, and few credit card issuers are based in these states anyway.

    Most major credit card issuers are based in states without usury laws and without interest rate caps on credit cards. Banks and credit card issuers based in these states can charge any interest rate they wish -- as long as the rate is listed in the cardholder agreement and the borrower agrees.

    And thanks to a 1978 U.S. Supreme Court decision, these the-sky's-the-limit rate policies dominate the credit card business.

    In Marquette vs. First Omaha Service Corp., the Supreme Court ruled that a national bank could charge the highest interest rate allowed in their home state to customers living anywhere in the United States, including states with restrictive interest caps.

    When it comes to credit card interest rates, the law in a lender's home state rules. It doesn't matter what kind of rate cap exists in a customer's state. "

    In theory this could be true. The link you provided said it was told to him by an employee and isnt offically in practice yet. So who knows.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Veteran Member dishis's Avatar
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    Default Re: Is this really possible ?

    I guess it possible and legal, but extremely unethical. If it is true I hope anyone that gets this card knows what they are getting into.

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    Banned Melonie's Avatar
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    Default Re: Is this really possible ?

    from your same BBS link ...

    (snip)"Check out Advance America, and look for your state, and how much APR is for a "loan". There's another company that I used to see advertising on the cable channels (and not late at night, either), and was absolutely FLOORED by how much you actually paid them for even a small "loan".

    Some examples from Advance America:
    Illinois ..... $500 loan ... $850 fee .... 549.66% APR
    California (real limited) ... $255 loan ... $45 fee ... 214.71% APR (30 days)
    Michigan ... APR% decreases with increasing loan amount, varies from 332 to 402%
    Florida ... same as MI, APR from 286 to 391%
    Delaware ..... you know, where almost all companies incorporate, real close APR around 440%
    North Dakota ... close to IL amounts at 521.42%
    South Dakota ... a "home state" for good ole Citigroup, right around 490%"(snip)

    note that these imputed interest rates are net of fees ... i.e. the loan may have a stated interest rate of 30% but the additional transaction fees result in a de-facto interest rate of 200-300-400% !

    The bottom line here is that subprime credit card lenders are being hit with huge losses, and need to recoup these losses in order to stay in business. Somewhere I saw a recent stat that more than 30% of subprime credit card borrowers are delinquent. There is no constitutional right that people with low incomes and a poor history of paying bills are entitled to loans / credit cards ... so the reality is that if high risk future borrowers want loans / credit cards they are going to have to pay 'through the nose' to make up for the losses caused by their deadbeat fellow subprime borrowers.

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    Featured Member Vamp's Avatar
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    Default Re: Is this really possible ?

    Advance America is a payday lender. Those loans are to be paid back in a short period of time. APR is an annual percentage rate, which means the interest over a whole year. They are not held to the same laws as credit cards.

    http://www.msnbc.msn.com/id/20464621...playmode/1098/

    "US consumers are defaulting on credit-card payments at a significantly higher rate than last year, raising the prospect of problems in the stricken US subprime mortgage market spreading to other types of consumer debt.

    Credit-card companies were forced to write off 4.58 per cent of payments as uncollectable in the first half of 2007, almost 30 per cent higher year-on-year. Late payments also rose, and the quarterly payment rate – a measure of cardholders' willingness and ability to repay their debt – fell for the first time in more than four years."

    Credit card stats are never divided into prime and subprime. Credit cards are fluid they can start out prime, go to subprime, and back to prime based on account history.
    Anyone that has a credit card is paying more than ever before no matter what your status. Credit card companies are no longer returning fees, reducing interest rates without steller credit and other accounts opened because they need the money to cover their other losses. Everyone pays when these financial institutions gamble.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Banned Melonie's Avatar
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    Default Re: Is this really possible ?

    Advance America is a payday lender. Those loans are to be paid back in a short period of time. APR is an annual percentage rate, which means the interest over a whole year. They are not held to the same laws as credit cards.
    I never said that Advance America was involved with credit cards. I was merely pointing out another example of 'legal' but astronomically high interest rates.

    Credit-card companies were forced to write off 4.58 per cent of payments as uncollectable in the first half of 2007, almost 30 per cent higher year-on-year. Late payments also rose ...
    This is an industry wide statistic, which reflects write-offs across the entire range of credit card issuers, from Amex Black to First USA Platinum Visa to Capital One Visa 'classic' to Bank of America's illegal alien Visa card. However, the write-offs are not uniformly distributed across this entire range. On a percentage basis, the write-offs on cards issued to 'subprime' customers far exceed the write-offs associated with 'prime' customers, and the mega-credit limit customers have essentially zero defaults / write-offs. See

    Credit card stats are never divided into prime and subprime. Credit cards are fluid they can start out prime, go to subprime, and back to prime based on account history.
    this is true in regard to 'public' stats, which as you point out are always lumped together. However it is NOT true in regard to the individual financial statements of different banks concentrating on 'prime' versus 'subprime' credit card customers. You'll find a far different financial picture between American Express and Capital One, for example.



    Anyone that has a credit card is paying more than ever before no matter what your status. Credit card companies are no longer returning fees, reducing interest rates without steller credit and other accounts opened because they need the money to cover their other losses. Everyone pays when these financial institutions gamble.
    Again this is not the case in the real world. The interest rate on an Amex Centurion (Black) card is LIBOR (currently 5.26%) + 1.5%. The interest rate on my brand new Visa Platinum card is 7.9% fixed. The interest rate on First USA's visa card is 12.24%, or 16.24% or 23.24% depending on borrower's credit rating. The interest rate on Bank of America's illegal alien visa card starts at 21%, with penalty rate rising to 30%.

    The obvious point is that everyone does NOT pay higher credit card interest rates to make up for the disproportionately high default and write-off rates primarily associated with 'subprime' credit card customers. The higher interest rates are being charged in direct proportion to the individual issuer bank's targeted customer market segment, and beyond that are directly proportional to the creditworthiness of the customer. In terms of your comment, Amex is NOT gambling, while Bank of America is not only gambling big time but playing Russian Roulette (actually Mexican Roulette to be more accurate) and hoping that their illegal alien cardholders won't max out their new credit cards and then disappear back to Mexico.

    I will concede that 'prime' credit card customers with Capital One or Bank of America ARE being charged higher interest rates than their credit rating / history deserves, in order to help those banks cover mounting write-offs coming from their 'subprime' credit card customers. However, 'prime' credit card customers who stay with Capital One or Bank of America deserve what they get. The reason I got a new Platinum Visa with a different bank is that Capital One announced that they were jacking the interest rate on my old Visa card to 13.9% on the 15th of September for no specific reason, so there's no way I'm going to stick around and subsidize 'subprime' credit card defaults to help out Capital One stockholders.

    However, in the grand scheme of things, the credit card market is morphing into 'prime' vs 'Alt-A' vs 'sub-prime' based on the issuer bank's chosen market segments combined with credit card customers 'voting with their feet' if they have the credit rating to do so.
    Last edited by Melonie; 09-10-2007 at 02:45 PM.

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    Featured Member Vamp's Avatar
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    Default Re: Is this really possible ?

    I have worked for a very large credit card company very recently.

    Just because a person has a Capitol One credit card does not mean they are subprime. Just because you have an American Express does not mean you are prime either.

    I sat in on company meetings and they are never broke down into prime and subprime because they are fluid. If you are late or have any negative information on your credit report, you are down graded. Unlike a mortgage where you are locked into the terms at the time you sign on the dotted line.

    The reason I quit the large credit card company is because of stress. I worked with their largest portfolio. It is amazing how rich people bitch about one $45 fee that I cant reverse. They bitched because they went on vacation during their due date, didnt make their payment, 30% default rate, and I cant reduce their interest rate. The list goes on and on. I got sick of being shouted at while my hands were tied. The criteria was changed this year. The company returned $175 million in 2006 in fees alone and they wanted to plug that hole.

    As far as Bank of America the illegal immigrant cards are very low credit lines and are usually secured.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Banned Melonie's Avatar
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    Default Re: Is this really possible ?

    just because a person has a Capitol One credit card does not mean they are subprime
    true on the face of it. Capital One offers several 'levels' of cards besides subprime, including the Platinum Visa which I am abandoning due to Capital One's unilateral interest rate increase announcement. So IMHO after Sep 15th it is highly probable that Capital One will have lots of subprime customers who can't move to a different bank's card because they can't get approval, plus a few brain-dead prime cardholders who didn't read the interest rate increase announcement and/or feel that paying a 14.9% interest rate instead of 9.9% is their 'civic duty'. I'm betting that the vast majority of prime Capital One customers will no longer be Capital One customers, since they can qualify for a different bank's card with interest rates still in the 9.9% or less ballpark.

    Just because you have an American Express does not mean you are prime either.
    You didn't do your homework on this one .... the Amex Centurion (Black) card requires an INVITATION not an application, and carries a $2500 annual fee !!! Yes Amex also has 'entry level' cards, but NONE of them are approved for people with 'subprime' credit ratings !

    As far as Bank of America the illegal immigrant cards are very low credit lines and are usually secured
    well, a million defaults on $1000 credit lines still equals a billion dollars worth of losses ! Of course B of A is counting on the 21% interest rate plus fees to cover those losses, as well as overcharging other B of A credit card holders who haven't bailed out yet in search of lower interest rate cards from other banks.

    (snip)"To review applicants, Bank of America is using a procedure called "judgmental lending," pioneered by MBNA Corp., the credit card giant acquired by the Charlotte-based Bank of America last year. Instead of using credit reports, bank employees make subjective judgments based on their personal observation of the customer"(snip). from

    ^^^ this is the ultimate definition of 'subprime' lending practice.


    Say what you want, but it would appear to be abundantly clear that there is in fact a stratification of the credit card lending market - with that stratification being the results of the chosen market segment being catered to by different banks, as well as the 'voting with their feet' of prime credit card customers who are leaving the rising interest rates card accounts ( rising because of mounting losses from 'subprime' credit cards issued by the same bank) in search of lower rates at different banks (who do not have as much exposure to 'subprime' credit card losses thus can afford to offer lower interest rates to cardholders with very good credit ratings).

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    Featured Member Vamp's Avatar
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    Default Re: Is this really possible ?

    I wasn't refering to the Black card at all. But since you mentioned it the Black card is just at status symbol and not as hard to get as many think. Yes you need excellent credit and already have a Gold Amex with a huge access line. From those that I know unless you travel ALOT the Black card isnt worth the fees. Not to mention the fact the card is metal and hard to run thru machines.

    Yes even Amex has a credit card for those without perfect credit.

    But as usual we will agree to disagree
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Is this really possible ?

    As I read these postings, Vamp, I see you saying that within any credit card company, there is different layers of credit quality. Although they might all meet a minimum threshold to acquire their card, they can move up or down in quality inside of the company depending on their payments. If that is what you are saying, then that makes perfect sense. You might become subprime to them, but you are still a good customer that they do not want to lose. In fact, you may become more profitable.

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    Featured Member Vamp's Avatar
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    Default Re: Is this really possible ?

    Quote Originally Posted by texasdancer View Post
    As I read these postings, Vamp, I see you saying that within any credit card company, there is different layers of credit quality. Although they might all meet a minimum threshold to acquire their card, they can move up or down in quality inside of the company depending on their payments. If that is what you are saying, then that makes perfect sense.
    That is what I am saying. Prime and subprime terms can all happen on the exact same card depending on account history. Prime in the credit card world is a non default rate account. Subprime is a default rate. A default rate is what the orginal intrest rate is changed to if negative payment or credit history happens. Even there the default rates on many cards are tiered. With a good account history it can go back to prime. All of this can happen on the same credit card you have always had. Therefore it is impossible to say one credit card by name is subprime.

    But the dirty little secret of large credit card companies is that they dont care if they loose you as a customer. Why? Because they are so large and have so many cards that eventually they will pick you up as a customer somewhere else without you even knowing ie store credit cards, hotel cards, rewards cards, etc.

    They are also banking on the fact that if your credit takes a turn for the worse,your interest rate is jacked up to 30%, you cant change cards because of your bad credit, that they will make tons of money off of you.

    My other point is don't delude yourself into thinking that just because you have good credit you will get all the perks anymore. Everyone is going to pay one way or another for these companies mistakes/losses. Which Melonie pointed out with Capitol One's unilateral interest rate increase. Be even more careful with your credit card accounts than ever before.
    Last edited by Vamp; 09-11-2007 at 12:16 PM.
    Nature knows no indecencies; man invents them. ~ Mark Twain


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    Default Re: Is this really possible ?

    Prime in the credit card world is a non default rate account
    ^^^ again I would make the point that a non-default interest rate on the lowest interest rate card offered to highest credit rating 'prime' customers by Capital One (= 13.9% as of Sep 16th) is not the same thing as the non-default interest rate on the lowest interest rate card offered to highest credit rating 'prime' customers by a different bank (= 7.9%). As you said, I guess we'll have to agree to disagree.

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