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Issuer of 79.9% Interest Rate Credit Card Defends Its Product

APR Shocks Many, but Issuer Says They Are Pricing for the Risk

If you have bad credit in the new era of credit card regulation, be prepared to pay -- dearly -- for the privilege of using credit. That's the message underlying recent credit card offers that feature jaw-dropping interest rates of up to 79.9 percent.

The sky-high rates may be a sign of things to come in the market for so-called subprime credit cards as issuers who lend to the riskiest of borrowers try to figure out how to stay in business and comply with the new credit card reform law.

"We need to price our product based on the risk associated with this market and allow the customer to make the decision whether they want the product or not," according to a statement issued by Miles Beacom, CEO of Premier Bankcard, the South Dakota credit card marketer that mailed test offers in September and October featuring 79.9 percent and 59.9 percent annual percentage rates (APRs) on cards with $300 credit limits. Premier markets credit cards issued by First Premier Bank.

Yes, It's Legal

A national bank charging 79.9 percent interest on a credit card is legal -- as long as the issuer fully discloses the terms as required by the federal Truth in Lending Act. Still, the high rate has been met with shock across the country because it is so much higher than prevailing APRs and penatly interest rates. The CreditCards.com Weekly Rate report national average for bad credit credit cards was 14.15 percent on Feb. 12.