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Discussion in 'Credit Talk' started by sam, Mar 1, 2001.
i thought 19.8% was murder, ripoff, crazy interest until i reached subprime status
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Course it's a ripoff
But it's standard intro rates even in the prime world especially if you get a card when you're young and in college. Only recently are people getting more aggressive about their interest rates.
My friends' cards often are still at 19 or so and they have perfect payment histories their whole lives.
My brother just used our techniques to double his credit lines and drop his interest rates to 9.99 and 12.9 respectively. Before that, he had 18% or so on his cards.
MBNA wouldn't work w/a friend of mine. His cards have been at 19.9 since he was an undergrad: 1992. He has a 18K balance. They know he's stuck so they refused to reduce his rate. He's filing for BK today. He can make his minimums plus a bit, but his debt won't be paid off for so long that he'd rather take the credit hit than pay them loan shark rates anymore. When he told MBNA he needed a break in interest rate or he'd file a bk, they told him to file.
and he'd never missed a payment or been late EVER in his life. They treat prime customers like *^$# too.
Re: Course it's a ripoff
Most credit card companies do not bank on the interest rate as a profit item. Interest rates are often tied to the prime and 18.9% is a good average. The companies count on a cardholder paying minimum payments (often 2% of balance) so that approximately 75% of your payment goes to interest alone. The profit margin depends on late charges, overlimit fees and annual fees. If a lender can assess ONE late charge on a customer it can begin a rolling cycle of these fees until the account is brought current. If you have 500,000 carholders for example, and you can impose a late charge of $29.00 on 1/4 of them monthly that is $3,625,000.00 in late fees alone. Say only 1/2 pay the late fee the first month, over a million and one half dollars profit for doing nothing.
As most lenders have more than 500,000 cardholders you can see how these numbers for late and overlimit fees make up and estimated 40% of their revenue.
Sorry to hear about your friend. I thought we had him all straightened out. If he had just paid a little more on the MBNA account, he could have avoided late fees and made some real progress.