How Much is Bad Credit Costing You?

Cost of bad-credit credit cards rising due to reform law

Subprime credit will be available, but expensive, harder to find

The credit cards offered to people at the very bottom credit rung have never come with terms that anyone would be happy about. Also known as fee-harvesting cards, these low-limit cards offer a credit line of just a few hundred dollars and come packed with fees that put you in debt before you ever make your first purchase. With Credit Repair Utah we can help you repair your credit so you can get low interest credit cards. The CARD Act, whose major provisions go into effect Feb. 22, 2010, restricts these fees on cards for people with subprime credit, so the card issuers are scrambling to make up for the lost income with monster interest rates -- and whatever else they can think of that stays within the boundaries of the law.

Some of the biggest fallout from the Credit CARD Act of 2009 for consumers with subprime credit already has happened: Card issuers have boosted interest rates, switched from fixed-rate to variable-rate cards, cut credit limits to eat up their available credit and closed unprofitable accounts. People in Utah with poor credit were affected as much or more than the rest of the country. "When you look at the subprime population, you can make the assumption they have a difficult time managing their money," says Gail Cunningham, spokeswoman for the Silver Spring, Md.-based National Foundation for Credit Counseling. "It could push them over the financial edge. ... You don't need a financial kick when you're down."

What's left for subprime customers? Issuers such as First Premier, HSBC and Capital One continue to offer low-limit cards to customers with poor credit. HSBC has pulled back its marketing, Shahani says, but Capital One has increased its marketing efforts and offers the best terms. Its current card offerings for customers with limited credit range from 16.9 percent to 22.9 percent APR and annual fees that range from zero to $39. "It's expensive credit, but not as expensive as First Premier," he says. A number of issuers also offer secured credit cards, which are guaranteed with a deposit for the full amount of the credit limit. First Premier is pushing its secured card, but Beacom says there's not a lot of interest in it. "People don't want to give up $300 of their cash today," he says. "That's why we instituted the high-fee product. They could pay it over time and didn't have to outlay $300 upfront."