The 43.5% APR Credit Card

Perhaps this British Airways American Express Premium Plus Card’s interest rate is in “metric” APR, but if not, no matter what side of the pond you’re on on, or road you drive on, you must agree that a 43.5% variable interest rate is bollocks. Who cares how many bonus miles you get, they’re just going to get devalued anyway.

UPDATE: The 43.5% APR is the effective APR after you include the £150 annual fee. Like commenter Hanke wrote, “It’s just like those payday loan places, where although the actual interest rate is low, the fees associated with the service give you a 300%APR.” Makes you wonder, though, what about all those American credit cards with annual fees? Their effective APR is also higher then, and as far as I know, they don’t have to include the fee in the stated APR (big print or no).

British Airways American Express [Official Site] (Thanks to Kerwin!)

Comments

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  1. cotr says:

    payback for the sliding dollar?

  2. if anyone in England is looking for a loan I’m sure there is a loan shark somewhere in America that’ll “quote you happy” with a better rate than that.

  3. scoobydoo says:

    It looks like the Premium Plus card is more of a charge card than a credit card, since it comes with 56 days free of interest on purchases.

  4. petermv says:

    It is only 43.5% because of the £150 annual fee. The actual rate is 17.9% which is not that great either.

  5. cmdrsass says:

    loan sharks offer much better terms

  6. Antediluvian says:

    Nah, remember the pound is ~2:1 to the dollar (just for the sake of easy math).
    So it’s really like 21.75% in dollars.

    Oh wait, or is it 87%.

    Crap.

    Well, like Barbie says, “Math is hard.”

  7. B says:

    It looks like the 43.5% interest rate somehow includes the 150 pound annual fee. I’m not sure how the math works here.

  8. petermv says:

    @Antediluvian: A percentage is a percentage no matter the currency.

  9. johnva says:

    @Antediluvian: A percentage is a percentage, regardless of what currency units it’s in.

    @B: Yeah, it says 17.9% in one place and 43.5% in another. I think this is just due to different requirements on how the British require credit companies to disclose these things. I have no idea what a “typical” interest rate is. My guess, though, is that the 17.9% is what you should compare with an American credit card. And it does have a grace period (unlike some subprime cards here in the U.S.), so I don’t think it’s all that bad a card as long as you actually pay it off every month.

  10. jsgriggs says:

    If you read the fine print you will see that the monthly interest charge incurred is the same for both cards. I’d guess to say that the 43.5% stated rate is a typo. If so I feel sorry for the AMEX ad kid that is getting fired over this.

  11. Antediluvian says:

    @johnva: I was just joking re: %age rates and exchange rates.
    But Barbie really did say “Math is hard.”

  12. Hanke says:

    17.9% APR on purchases; however, if you include the required 150 pound annual fee (that’s ~$300) they quote you the astonishing rate. It’s just like those payday loan places, where although the actual interest rate is low, the fees associated with the service give you a 300%APR. What surprises me is that the scary number is in large print.

  13. johnva says:

    @Antediluvian: lol, I think I need more coffee.

  14. kc2idf says:

    @Antediluvian: Yeah, HTML really needs a <funny> tag.

  15. JustThatGuy3 says:

    @B:

    That’s exactly it – the APR they’re quoting (like the standardized APR that’s quoted for US mortgages) includes the 150 pound annual fee. The actual rate on balances you carry is 17.9%.

    Ballpark math, it looks like they’re assuming you carry about a 585 pound balance:

    interest on 585 pounds at 17.9%: 105 pounds
    annual fee: 150 pounds
    total paid: 255 pounds
    APR: 255/585= ~43.5%

  16. MayorBee says:

    @Antediluvian & B: It’s Britain, so the correct term would be “maths”.

    It seems like “typical rate” is a rate they have to offer to two-thirds of the applicants. What you need to figure things out is the annual “cost of credit”, i.e. what it’s actually costing you to borrow the money every year.

    A little bit of simple “maths” says that with the £150 fee and going from 17.9% to 43.5%, they’re expecting you to run a balance of £586 per year and your annual cost of credit is £105 (or 17.9%) before the annual fee or £255 (or 43.5%) after the annual fee.

    I could be wrong though. I’m an accountant on the wrong side of the pond for these kinds of maths.

  17. Ein2015 says:

    @Antediluvian: The percentage doesn’t change.

  18. hamsangwich says:

    This is so clearly a typo. 4.35% with the annual fee. Let’s all calm down.

  19. mac-phisto says:

    @jsgriggs: it’s not a typo. the percentage rate includes the £150 annual fee.

    no matter how hard i try, i can’t seem to figure how they determined the rate was 43.5%, but that’s why it’s so high.

    i wish they would do this in the u.s. – annual fees are starting to make a comeback & in reality, they should be disclosed in percentage form for perfect comparison. after all, is that 9.9%APR card (w/ a $200 annual fee) really that great in comparison to a 14.9% card with no fee? not really – especially if you never pay finance charges.

  20. MayorBee says:

    @JustThatGuy3: Wow, I think that I must have done something right if our numbers came out so close.

  21. sleze69 says:

    If the rewards are good enough, who cares about the interest rate if you pay off your balance at the end of the month?

    I WISH there was a card with ridiculous rates AS WELL AS ridiculous benefits.

  22. chrisjames says:

    @mac-phisto: The 43.5% APR figure is calculated for a line of credit of £1500. At 17.9% that will give you enough interest per annum, plus the £150 fee, to bump the APR up to 43.5%.

  23. Triborough says:

    Combined with the £150 annual fee, why would anyone want this?

  24. johnva says:

    @Triborough: Not everyone pays credit card interest, so to those people the interest rate is irrelevant. The annual fee is quite steep, but could be worth it, especially combined with the bonuses, if you spend a LOT on the card annually. 1.5% on everything is pretty good. And I don’t know about Britain, but here in the U.S. credit card companies are often willing to waive annual fees if you call and ask.

  25. JustThatGuy3 says:

    @MayorBee:

    right back atcha…

  26. boomerang86 says:

    Isn’t it peculiar that there’s even a BRITISH Airways affinity card, offered by AMERICAN Express?

  27. malvones says:

    you guys, i think this is just an underhanded way of reimposing the tea tax…

  28. Shadowman615 says:

    @Antediluvian: I’m sorry, you got the math wrong.

    If 2 US Dollars = 1 pound, then a 43.5% British interest rate would be equal to approximately 7 ounces. So you’d need about 88 quarters, which is 22 dollars. That yields an rounded interest rate of 1100%. Stay away.

  29. xmarkd400x says:

    Look at it this way:

    Generic CC: 1% cash back, $0 annual fee.
    This CC: 1.5% cash back, $300 annual fee.

    When .5% of your purchases == $300, thats your break even point. So:

    If you spend more than $60k per year you should get the ‘premium’ card. This does not appear to be your typical consumer card, but a business/bigwig card.

    I bet Steve Jobs and/or Bill Gates spend $60k/yr on stuff easily.

  30. mac-phisto says:

    @chrisjames: i tired those calculations, but i could still only get the finance charge up to ~30%. i also thought maybe they divided £150/12 months to translate it into a periodic charge, but that would make the figure 166.7%.

    it appears as if they calculated the 43.5% using an average balance of ~£500. how they determined that figure, i have no freakin clue.

  31. steveliv says:

    my advice, go with a amex card with no annual fee, like Blue or Blue Cash.

  32. MayorBee says:

    @mac-phisto: Hopefully I can format this so it looks okay.

                                 Without Fee       With £150 fee
    Average Balance     £586                   Â£586
    APR                       17.9%                 43.5%
    Cost of Credit         Â£105                   Â£255

    All I had to start with were the two percentages and the £150 fee. The difference between the two percentages is 25.6%. The £150 fee is a direct increase in the cost of credit, so I knew the cost of credit with the fee was £150 greater than the cost of credit without the fee. If you take the increase in the cost of credit (£150) and divide that by the corresponding increase in APR, you get £585.9375. That’s the average balance the card is expecting you to carry. If you multiply that figure by the APRs without and with the fee, you get £105 and £255 respectively for the costs of credit. The check on this calculation is that the difference in the costs of credit is £150.

    I hope that explains it in a not too confusing manner.

  33. mac-phisto says:

    @MayorBee: that’s what i figured, but now i’m puzzled as to how they determined £586 is the amount they use to figure the cost of the credit – it’s such an arbitrary number. i mean, they could have used £1000 & the calculation would have worked to their favor (32.9% doesn’t scream holy shit next to 17.9% as much as 43.5%).

    whatever. no big deal – just that stuff like this intrigues me.

  34. MayorBee says:

    @mac-phisto: I’m thinking that they have to use statistically valid numbers to come up with the £586 number. They’re required by law to present the APR that two-thirds of their customers will receive, and they have to disclose their costs of credit on demand as well. The £586 amount is probably what the average amount carried by their current customers that most nearly fit the targeted consumers for the 17.9% APR. Or it could be a national average of balances carried by consumers in that credit range they’re targeting.

    I like this stuff too, even though it’s not quite in my line of work.

  35. WeAre138 says:

    Obviously it’s to cover the cost of “Free Replacement Cards” that they advertise in the summary box. Oh but wait, there is a footnote on that bullet. ‘Wonder what footnote says – “By free we mean $19.99 per additional card.”

  36. synergy says:

    Holy Cow! U$300 annual fee??? OK, I’ll go apologize now to my husband for getting a card with a $40 annual fee…

  37. alexteh says:

    The UK now has pretty strict rules on what is or is not allowed when advertising credit including how the APR is calculated. If anyone is interested, the UK Office of Fair Trading has a PDF available at [www.oft.gov.uk] which explains some of it…

    I guess the most pertinent section is:

    “APRs
    2.8 The APR (the annual percentage rate of charge) is an important piece of information for consumers shopping round for credit. It provides a yardstick for measuring the cost of credit under different types of agreement.

    Borrowers are able to compare the relative cost of credit from different sources as, in addition to interest charges, the APR reflects any other charges that have to be paid to obtain the credit, even if they do not arise directly under the credit agreement. “

  38. BillyShears says:

    Just chiming in to reiterate what scoobydoo said further up. AmEx offers an array of charge cards in addition to their smaller selection of credit cards. The former, while you’re technically supposed to pay it off in full every month, do carry APRs. And they’re offensive.

    They really want you to pay it off every month, it’s kind of the point. (And a good habit to get into, even with normal credit cards.)

  39. krom says:

    I always thought Amex was specifically for paying off each month, not maintaining a balance. I didn’t think they even allowed it.

  40. chrisjames says:

    @MayorBee: It’s not 17.9% APR though, it’s 17.9% p.a. The calculations are not the same.

    I was wrong before. I read more closely, and the 43.5% is not taking the £150 annual fee into account, it’s really the APR you get on purchases. It’s saying you get a 43.5% APR rate but you must also pay the annual fee on top of that.

  41. At least they’re honest hahahah

  42. parrotuya says:

    This card is for British gentlemen with a stiff upper lip. Only wealthy British gentlemen can afford this card. Tally-Ho!

  43. bwcbwc says:

    In the U.S., transaction fees are rolled into the effective APR for the month when the transaction fee hits the account. So a card that is normally 10% say would show an APR of over 36% (including normal interest accrual from the date of the transfer) if a 3% transaction fee was assessed on a $1000 balance transfer during the billing period (assuming prior balance was zero).

    I don’t have any cards with annual fees, so I can’t tell if annual fees are treated the same way.

  44. mac-phisto says:

    @chrisjames: p.a. stands for per annum. if you read the ad it explicitly states the 43.5% includes the £150 annual fee.