I often wonder about the irony of subprime lending - whether it’s made available through mortgage or through credit cards or through any other source of credit. I mean, people with bad credit are the very people who should be staying away from subprime borrowing. These people are already in the subprime category because of financial troubles and then there are these stupid (and very likely, unaffordable) subprime products targeted at them - which have the potential to throw them deeper down the financial hole.
Here is one such stupid subprime product - the Continental Finance MasterCard. It’s hard to believe that this piece of plastic comes with an initial credit limit of just $53 after a long list of fees!
Below are some of the amazing rates and fees that go along with this card.
- Account setup fee: $99
- Program participation fee: $89
- Annual fee: $49
- Account maintenance fee: $120 (charged @ $10/month)
- Purchase APR: 19.92%
- Authorized user fee: $30 (great! seems like $53 credit is a bit too much for a single person to handle)
- Credit limit increase fee: $25 (and you don’t even have to ask for it!)
Each Credit Limit increase will be $100.00, subject to a maximum Credit Limit of $2,000.00. Each increase will appear on your Account no later than one (1) month after you have qualified for such increase. At the time of each Credit Limit increase, a $25.00 Credit Limit Increase Fee, which is a FINANCE CHARGE, will be charged to your Account.
You need to call these people and ask them to stop; otherwise, they are automatically going to increase the limit by $100 each time and charge you the $25 fee.
- Internet payment fee: $4 for each authorized internet payment. I just don’t get this - why are people with bad credit charged for paying their bills online? .. probably to make sure that they don’t start paying their bills automatically or something?
And, here is how the $53 initial credit limit appears:
Your initial Credit Limit will be $300.00 and you agree to pay the following fees, which will be billed to your Account and will appear on your first monthly Billing Statement: a one-time Account Processing Fee of $99.00, a one-time Program Participation Fee of $89.00, a monthly Account Maintenance Fee of $10.00 and an Annual Fee of $49.00. Your available credit after these charges will be $53.00 at Card issuance.
Here is an YouTube video that points fingers at this same credit card for some of the reasons mentioned above:
[Feed readers click on this link to watch the video.]
If it’s so much risk then don’t issue credit cards to people with bad credit (I have similar thoughts with regards to subprime mortgage - it’s a self-inflicted disaster on part of both, lenders and borrowers). Just offer secured credit cards and lend against a collateral.
By the way, there is another not-so-obvious trap hidden in such credit cards for people with bad credit. If you apply for a particularly horrible “bad credit” credit card and start building your credit history with this card, then some time down the line, when you think you have built sufficient credit and no longer need this horrible card, you are going to face a problem - your credit history is going to take a hit if you close this account. And, if you don’t close it down, the annual fees are going to create a leak in your pocket for quite some time to come.
So much for the cost of bad credit and so much for people with bad credit wanting a credit card (which creates the demand for such products in the first place).
If we ever have a competition for the worst credit card in the world, do you know some good competitors for the one I mentioned above?