Then there are the high-fee, low-limit cards, which have gotten some issuers in trouble with regulators. First Premier Bank of South Dakota paid $4.5 million last summer to settle charges with the New York State attorney general over deceptive marketing, but its offer for a gold MasterCard remains pretty much the same: a catchy 9.9% interest rate but $256 of fees on an account that opens with a limit of $300.
Like First Millennium, First Premier is not selling access to large lines of credit, counters Chief Executive Dana Dykhouse; it is offering the chance for people with poor credit histories to rehabilitate themselves.
Dykhouse says the marketing practices the New York attorney general objected to, which were industry practice, have been eliminated. He likens his business to the high-risk auto insurance business. "People we provide service to have speeding tickets in their credit."
There are many iterations on this type of card. Another, the Total Visa card by Plains Commerce Bank, also of South Dakota, offers a tantalizing (ha!) 19.92% interest rate and fees of $200 for an initial credit line of $250.
Not surprisingly, the over-limit fees for such cards are high, too. In both these examples, it's $29.
Rewards programs also seem to offer a lot, but the card holder gives up much in return. Three such cards have rates of nearly 30% for borrowers who fall behind on their payments, including the Marathon Platinum reward card and the Speedway SuperAmerica Platinum MasterCard, both issued by JPMorgan Chase, and the Citgo Preferred Visa, issued by Citigroup.
A spokeswoman for Chase says, "We pride ourselves on having an extensive array of products so customers can find one that fits their needs."
Of course, this is also playing out against a backdrop of declining spending and rising delinquencies. Bank profits have been hard-hit by subprime mortgage exposure. At Bank of America, just to continue the example, fourth-quarter profits were down 95% over the previous year, after write offs for credit exposures, trading losses and rising credit costs.
Credit card revenues for all of 2007 were up 4%, to $25 billion, but profits were down 35% on rising credit costs.
What better way to get things back on track than to cull your customer base and increase rates where you can get away with it?
And since rising delinquencies are an industry-wide problem, the other major credit card issuers are acting the same way.
"The only thing they can do is raise rates," says David Robertson of the Nilson Report, who sees rates climbing -- even for responsible borrowers--into the 20% range and above.
If rate hikes are unavoidable, consumers should look at other card features to decide which one to choose, says Arnold at cardratings.com. Penalty fees, for starters, grace periods and other details. Try to ignore the hype about the perks of the cards, Arnold says. "It is often the fine print that kills."