This card is backed by HSBC and offered through First Premier Bank. This is known as a sub prime credit card.
Prior to 2010, First Premier cards were available for consumers with no credit, bad credit and horrible credit. There were four options that ranged from non-secured to secured credit card accounts.
The new credit lending regulations that took effect in 2010 led to a reduction in HSBC First Premier card offers. These sub-prime credit accounts could not meet the new laws that required sub prime credit lenders to limit excessive fees for new accounts.
Fees on The Card
The previous non-secured credit accounts were for spending limits of only $300. When your application was accepted, you were charged:
- Processing Fee $95 (one time fee)
- Annual Fee $75
- Second Year Annual fee $75 (charged at $6.25 per month)
The policy on paying fees up front to receive your new credit card changed on occasion but one thing was clear. Your initial spending limit of $300 was reduced to about $200 before you even received your new credit card.
The interest rate was high at 23.9% APR. That was not unheard of in the sub prime lending market but was double the rate charged to consumers with good credit by other lenders at the time.
The new regulations do not permit even sub prime credit issuing banks to charge more than 25% of the new spending limit in fees during the first year a new account is opened. There are no fee limits for successive years.
The reason for that is the assumption by regulators that sub prime credit such as the HSBC First Premier card is meant to be used as a method to improve your credit.
The theory is that after a year of paying faithfully on this high-interest, high-fee account, you will have the ability to qualify for better terms with a major lending bank.
Advantages
If you have bad credit, you can qualify for the one HSBC First Premier card that is still offered by First Premier Bank.
Currently, the other options have been removed from the bank’s site but are expected to be offered again with new terms designed to meet current laws. If you need a credit card and can’t qualify elsewhere, this may be your only option.
Disadvantages
The First Premier card now offered to consumers with no credit or poor credit is not a good deal. There are better options to be found on other bank sites where reasonable terms are offered for secured credit card accounts.
The fees have been reduced to meet the new regulations. Processing fee to obtain a card is now only $45 and is a one time fee that must be paid when you are approved for the new account.
The first year annual fee has been cut to $30. You will be charged $75 for the second and future years.
The truly shocking revelation in the terms and conditions of this card is an interest rate listed of 59.9%. At first glance, you might think this high APR is not allowed under the new laws.
However, fine print in the laws provides some exceptions for sub-prime lenders. If you have bad credit, you are a high credit risk. The reduced fees are now reflected in the high 59.9% interest rate.
The other concern when applying for the First Premier card is the sheer length of the small print terms provided. Every possible contingency is covered in the small print of the contract – and they are not to the consumer’s advantage.
Summary
Unless you are desperate to have a credit card and cannot afford to fund a secured credit card, the First Premier is an offer to avoid. The terms are rigorous, the fees are high and the interest rate is outrageous.
