Usury By Any Other Name Still Stinks

First Premier Bank is now offering a credit card with an interest rate of 79.9%. You did not read that incorrectly nor is it a typo. They are offering a card, with a credit line of $300, with the APR of 79.9%. The card also includes an annual fee of $75. This is down from the prior amount of $256 because of the new law passed by congress limiting the amounts of fees. This is the card they issue to subprime people, or in other words, those who can least afford to pay these sorts of fees.

Shockingly there is nothing in either the Social Principles or the Book of Resolutions about usury, credit cards or debt. This is a position where the church needs to take a stand. By any definition this APR is usury, although from a strict biblical interpretation any form of interest is usury.

If you try and put this card into some online credit card calculator it won't work simply because it won't take an interest rate that high. Using the FTC's calculator, if you make the minimum monthly payment on a $300 balance with a 79.9 % APR this is the message you get, and I quote:

based on the information you provided and assumptions that we used
to calculate the time to repay your balance, we estimate that you will
never pay off your credit card balance if you only make the minimum payment
because your payment is less than the interest charged each month.

You will NEVER pay it off! Talk about a trap. Now I know that people who are taking out these cards have culpability in the activities, but let's be honest. 1) This is predatory lending, you know the thing that got us into our current financial situation, 2) the people who are receiving these cards have usually proven in the past that they cannot handle credit, and so they go out and get this, making their situation even worse, and most importantly 3) Our culture and economy are based on buying things now and buying them on credit. Instant gratification is one of the driving forces in this society.

Now, using another calculator, with a $300 balance, paying $20 a month, which is much more than the minimum, it will take 8.666 years (104 payments) and will cost $1774 in interest. That does not include any late fees or the annual fee of $75. Now if you drop the payment to $15 a month, it totally freaks out on the interest paid and you jump to 50 years to pay it off.

I don't honestly believe that congress is ever going to really tackle this issue because there is too much money involved, but they need to. There is a bill currently in the House which would cap interest rates at 16%. I don't know if that is the best amount, but it's at least a start. I know that passing this bill will mean that many people will no longer have access to credit, but it's credit they cannot afford. Hopefully it would also mean that we as a society would have to deal with the fact that we cannot continue to grow our economy through debt financing. It will always come back to get us in the end.

For more information on what's going on legislatively and how to be informed go to Americans for Financial Reform, which is a coalition of groups concerned about these issues. Maxed Out by James Scurlock is also an excellent book on credit card issues.