Loathed. Despised. Hated. Those are all words I’ve heard used to describe First Premier Bank credit cards. But is calling it a “scam” an accurate description or not?
2015 Quick Summary: The reason people have such a negative opinion about Premier is largely due to their inredibly high fees: $170 during the 1st year alone! They’re not technically a scam, just a really sucker deal. If you have bad credit then you will be better off with this card instead.
What they do?
If you’re not familiar with First Premier Bank, they are card-issuing financial institution chartered in the state of South Dakota. A little history lesson: South Dakota was the very first state that had the competitively brilliant but socially evil idea to pass a law in the early 1980’s to allow any bank headquartered there to charge whatever rates they please nationwide (using the legal parlance of being able to export South Dakota rates). This lured major banks like Citicorp to move their money-center credit card operations to the badlands and jack up their interest rates (or at least charge the highest prevailing rates), which had previously been held down by New York usury laws. This was motivated by financial survival as much as greed, because the banks’ cost of funds was super high back in the eighties (mid-teen %) and if the banks couldn’t tack on a little margin to that they would go out of business. But I digress. Back to First Premier. They have a few brick and mortar locations there which offer full-service banking, however they’re much better known for their credit cards available nationwide. In fact, according to Wikipedia, First Premier is the 10th largest issuer of MasterCard and Visa cards in the US. There is big money in sub-prime credit cards.
But these aren’t just any credit cards. First Premier is famous for fees… lots and lots of fees! Which brings us to the next part…
Why are they dispised?
Yes, they are credit cards for bad credit. But even taking that into account, the fees and interest rates go above and beyond the status quo for this category. Here’s a run-down for one of their credit card deals to give you an idea:
First PREMIER Bank MasterCard
- Interest rate = 36%
- Processing fee = $95 (one-time)
- Annual fee = $75 for first year, $45 thereafter
- Monthly servicing fee = None for first year, $6.25/month thereafter
In their marketing bullets, they say “If approved, your $95 Processing Fee gets you a $300 credit limit.” So you are paying these fees for a minimum credit limit which is quite low.
In addition to this particular card, there are several other flavors marketed under different names such as Classic, Gold, Forward – and my favorite – Premier Possibilities. It’s my favorite because I have no clue what “possibilities” the card offers, other than the possibility of going broke by paying all those fees 😉
Despite the different names, the fee structures and APRs on these cards are all very similar. Upon studying their applications, I actually have a hard time differentiating between some of them, other than their names and designs.
So the question as to why so many people hate them, I think the answer is quite obvious. But is it fair to say that First Premier Bank credit cards are a scam?
What it comes down to?
Despite the outrageous fees they charge, when I looked at the application for the aforementioned card, the fees and interest rates were spelled out in black and white:
They are telling you upfront how they are gong to stick it to you. So technically speaking, they are not a “scam” since say upfront how much you will be charged. However, just because they are not a “scam” doesn’t mean they are a good deal. They are clearly taking advantage of those with few other options and even less financial literacy.
In my personal opinion, I think they are one of the absolute worst choices you could make for building or rebuilding credit. Why? Simply because you can accomplish the same thing using other cards that cost a lot less. I just hate to see people get caught up in this type of trap without realizing they might well have other and better options.
For example, if you went the route of a secured card you could put up a security deposit as low as $200-300 and in exchange, get a card that may only have an annual fee as low as $30 or $40. Since the security deposit will be refundable when you close the account, it’s a much cheaper option than paying the processing fee + annual fee + servicing fee that First Premier Bank charges on their cards. Check out this page to see the top secured cards.
I just wish people would read the First Premier applications before applying, because I think it would save a lot of heartache, if people understood what they were committing to.
That said, I totally respect a person’s right to spend their money how they wish. If someone wants to apply for a First Premier Bank card and ship their hard-earned money off to South Dakota, I believe that’s their right. After all, there’s no law against someone overspending on say, a designer handbag, so if someone chooses a pricey credit card then I respect that as their right. Unfortunately, it seems like most people aren’t reading the application thoroughly, so they don’t understand why they’re having to pay exorbitant fees and interest rates. Caveat emptor.
Last updated May 20, 2015