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Have poor credit? Beware of nightmarish interest rates.

Scoring 80% may be a passing score on a school test, but would it pass your criteria for an acceptable credit card interest rate?

79.9%, nearly 80%, is the introductory interest rate on the new subprime credit card offered by Premier Bankcard. With a need to extend credit to a growing number of consumers with poor credit scores, consumers need to be aware of 'risky' credit terms.

In order to recoup losses initiated by the CARD act of 2009, many subprime credit card issuers have shifted their once high up-front fees to soaring interest rates. Card issuers consider it a 'privilege' to use credit, and they defend products that are marketed toward risky borrowers - those with low credit scores or no credit history. In an article on creditcards.com, Premier Bankcard CEO Miles Beacom defended the card's interest rate by saying, "We have to be able to price the product to offset the risk."

Though it seems that such staggering interest rates should be illegal, the interest rate is only one side of the story. Consumers who believe they 'need' a credit card also help fuel the fire. According to Premier Bankcard nearly 700,000 people have signed up for the card since its inception. If you are considering using a subprime card to help rebuild poor credit, make sure you know what you are getting into. Here are some basic questions to ask yourself before signing the dotted line:

  • Ask yourself whether or not you want the card because you are responding to something you believe you 'should' do. If you think using a card offer with an interest rate of nearly 80% will be a beneficial tool in healing your credit, you need to have a plan in place that allows you to pay the balance in full each month.
  • Along those lines, ask yourself whether or not the credit card will serve as 'extra income', or if it really will be used to rebuild credit. The problem that arises when you view credit as additional income is that you spend beyond your means and can't repay the balance in full at the end of the month. This is when interest begins accruing. And, at a rate of 80%, that means your balance would almost double with just one minimum payment.
Rather than digging yourself into a deeper hole, be fully aware of what you are about to take on. It's one thing if you have a plan in place to pay off the balance each month, but it could become a nightmare if you don't.

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