Re: Wow, I got a preapprova
11-28-2012 06:46 PM
First Premier vs. the Fed: a cat-and-mouse game
Before the Credit CARD Act, First Premier’s terms were even more egregious. An unsecured Visa with a $250 credit limit included:
- • A $35 processing fee
- • A $119 acceptance fee
- • A $6 monthly fee ($72 a year)
That adds up to $276 in fees – more than the credit limit. The CARD Act stipulated that the first year’s fees can be, at most, 25% of the card’s credit limit, prohibiting this practice. The Visa could cost, at most, $62.50 in the first year.
Not to be deterred, First Premier issued a set of $300 credit limit cards with a $75 annual fee: identical triplets Aventium, Centennial and Classic. In addition, 1st Premier began charging $95 in processing fees, which were assessed before the card was approved and therefore technically did not count towards the first year limit.
“Nice try,” said the Fed, which clarified earlier this year that all processing fees are indeed part of first year’s costs. First Premier moved on to Plan B: the $95 processing fee took on its current incarnation, a security deposit.
What’s more, the Credit CARD Act regulates how much issuers can levy in fees for the card’s first year: 25% of the initial credit limit. After Year One, however, all bets are off. Because 1st Premier charges the maximum allowed fee upfront, the bank is barred from levying further charges the first year. However, as soon as the CARD Act’s protection expires, a number of fees and charges crop up:
- • A 3% foreign transaction and cash advance fee, which are industry standard but are notable because they only take effect the second year, after the fee cap expires
- • A $3.95 one-time fee to access online banking, whereas most banks actually reward e-statements
- • A $6.50 monthly fee, which doesn’t seem like much but adds up to $78 a year
Did you really type all this? That's a looong post that contains a lot of technical info.