I'm Paying 43 F*ing Percent Interest!!!!

[On the Road]

I got a new credit card from Bank of America recently in order to get a cash advance which I plan to pay back by June.

My first bill came and the interest rate was identified as 21.9%. OK. It's not for long. Then, below that, there was a line in large type indicating the effective interest rate. It was over 43%!

I can't believe it. Is that even legal?

[Nite Owl]

1. Extortion! n/t

[Gyre]

2. Read the fine print on the terms of the agreement,

and pretend you're a lawyer. It's probably there somewhere. :)

Gyre

[Jack Rabbit]

3. I'll bet it is as long as the Bush regime is in power

!!

[Spider Jerusalem]

4. Sadly, it's legal....

This is why you read the fine print...it's usually cleverly worded to say the equivalent of "the Financial Institution reserves the right to give a merciless, unlubricated cornholing to the Cardholder on our whim, without so much as a reach-around". Heh.

[LeftCoast]

5. Cash advances are usually at a higher rate

but that does seem predatory. Unfortunately, our Republican Overlords have decided that such practices should be legal and are in fact good for 'murka.

Hope you can pay it off or switch it to another, less expensive card.

Good luck!

[alarimer]

6. Can you transfer the balance to another card?

I get an endless number of offers for low-introductory rates. It would certainly be better than 43%.

[Zensea]

7. If that's a surprise

you shouldn't have the credit card cause you're likely to get in more trouble!!!
All it really means is you're paying 43% this month because they figured the fee you paid for the cash advance into the interest.
Say you had a card that had a 0% interest rate and cash advanced $1000 and they charged you a 5% fee or $50. Well for that month the effective interest rate wouldn't be 5%, it would be 60% since that's what the yearly interest rate would have to be to cause an interest amount of $50 for a month.
What makes it "legal" is that $50 is not considered to be interest but a fee ... that's the reason for the language "effective interest."
Some lawyer somewhere probably got paid a lot of money to think of that wrinkle.
Look at your card next month and I bet the effective interest is back at 21.9% if you don't take any more cash advances in the meantime.

[On the Road]

12. Yes, It Was a Surprise

and no, I'm not about to get in trouble. As you point out, it probably includes the cash advance fee, and it might actually be legally mandated to include it.

I did the cash advance to close on two samll houses that I bought for $40,000 below market. No way I would go back on that. I just need minor renovations to get a better appraisal and a home equity loan. I did that in 2003 and got completely out of debt. I'll do that again this summer.

The card was a way to avoid the hard money people or the higher-rate consumer loan people. It seems to be just bad presentation of the data.

[Zensea]

13. I was being overly flip

I realize that actually -- couldn't think of another way to put it at the time. Sorry about that.
Personally I think the real crime is that interest rates can be at 22% and that right when your credit is at its weakest is when they charge you the highest rates ... creates this viscious cycle. I know, I've been in it and am not really out of it yet. The real problem is the base rate they are allowed to charge people. I actually kind of get or it doesn't bother me as much the idea of being charged the fee for the actual cash advance. The trick is to do balance transfers that the lower interest rate saves you more money over a six month period than the initial fee costs you.

[Droopy]

16. ok

So how do you find a house for $40,000 below market value? Shit, I'd retire early if I knew how to do that.

[MissB]

8. It is probably the combination of the interest rate

and the fee for the cash advance. Your interest rate is still likely 21.9%, but with the cash advance fee (likely $50) then for this month the effective fee is much higher.

Call the bank to confirm, but I'm betting that is what it is.

[On the Road]

10. I Think You May be Correct

It didn't occur to me at the time. I didn't call or examine it carefully yet (the bill was left at work). But that's the only explanation for that huge disparity. That's OK then. Thanks -- your explanation was nicely worded.

[Senior citizen]

9. Before the corporatocracy took over our government

it was called usury, and it was illegal.

Now it is legal, and you can't even file bankruptcy if some emergency prevents you from making payments.

Our government now operates in the interests of business, not in the interest of consumers. It is called fascism. It leads to slavery--the outsourcing of jobs keeps lowering wages so that eventually businesses will get most of the workers from cheap-wage countries or domestic prisons. Dept slavery means that people work for barely enough to survive on, due to the need to repay their debts. And people who can't find jobs at all end up selling themselves in any way that they can. Fascism isn't any fun at all--well, except for those who are making the big bucks. Many of the companies that paid compensation for using slave labor in Nazi Germany, were able to pay that compensation easily because they are still big, prosperous companies--bigger and more prosperous than before. Those who profited from slavery, whether in the U.S., in Nazi Germany, or elsewhere, were able to use those profits to gain control of our government. Now they can do it all over again, legally. Remember, slavery was legal here before, it was legal in Nazi Germany, and it not only can happen here, it HAS happened here and probably will again. At least it sure looks that way to me.

[catzies]

11. Cash advances charge the highest rates/fees. It's awful, isn't it?

n/t

[Floogeldy]

14. Don't ever do that again

B-)

[R. A. Fuqua]

15. It SHOULD be illegal

but unfortunately we have no limits on what interest rates banks can charge.

Years ago (I think the 1960's or 1970's) people with credit card debt were at least allowed to write off some of the $$$ spent on interest on their taxes (as they still can do with Student Loan interest and interest paid on their homes).

I think it is very sad that people can no longer get even this small amount of relief.