Credit Cards with More Risk than Rewards

Got bad credit? First Premier has introduced a credit card available and ready for practically anyone.  But, there is a catch: your wallet will take quite a hit.  

The card, as reported by CNN Money, will be tacked with numerous fees, including higher charges for customer’s card limit ($400/year to start, then rises with higher limits) and an APR of 36%.  The high rates are to incentivize cardholders to pay off debt quickly and be able to gain credit when in all likelihood they would never stand a chance.  However, the card holds major flaws by attacking many people who may not understand or be able to handle the risks that are associated with the card.

Imagine the millions of people who don’t have a high enough credit score to qualify for a credit card with relatively standard rates.  The struggles of constantly being denied and unable to establish (or re-establish) credit would be extremely frustrating.  Now, a card is offered that grants one a credit card, but at extreme risks.  The acknowledgement of the real risk doesn’t necessarily equate to the cardholder, yet the act of passing on what has been denied so many times over may be too hard to overcome.  Is this a fair process? Perhaps potential cardholders should be inherently granted the knowledge of the risks, but in all honesty, First Premier would never be completely upfront with their risky clients.

Next, the problem we hold is the aspect of First Premier’s target market.  Cardholders of First Premier likely hold low credit scores for a reason.  A temptation to be given the “buy now, pay later” methodology highlights what First Premier and their competitors plan to do in this business scheme.  There is an incentive to see many cardholders fail to pay their monthly dues.  The industry may state their interest in helping those in need, but really, the gains of the cardholder come at too high of a risk to justify their so called “helping hands”.  There is a reason that Americans have lost faith in the financial industry.  The poor handling of investments and the untrusting hands of bankers and financial analysts make the consumer struggle with realization that these kinds of deals may not be of best interest in the long run.

While other competitors try to fight the bad reputation of First Premier’s credit card, they too have established interest rates that far exceed the benefits a person gains even with their risk due to low credit.  Until the balance is made, I can’t see a reason these companies should be trusted.  Unfortunately, the target market may fall into the pit for the first time or once again, pinning cardholders in the position they signed up to fight against: poor credit.  

References:

Ellis, Blake. “First Premier’s $400-A-Year Credit Card”. CNN Money. http://money.cnn.com/2012/02/09/pf/first_premier_credit_card/index.htm?iid=HP_River