Miles Beacom's a brave man. After a few years of consumer backlash against the credit card industry, marked by unprecedented financial reform and ongoing federal investigations, Beacom's company earned a scolding from Consumer Reports. As the head of Premier Bankcard, it's Beacom's job to lead one of the few credit card issuers still opening subprime accounts.
As we've written about before, the First Premier Bank MasterCard certainly isn't the best value on the credit card market. Depending on whether you respond to a mailed credit card application or to one of the company's online ads, you may have to pay a few hundred dollars in fees just to get a MasterCard with a $300 credit limit. Should you manage to pay down those fees and earn the bank's trust, you can qualify for a few hundred dollars more in credit, as long as you pay half of your new credit line in account adjustment fees.
Consumer Reports hates this. They named the First Premier Bank MasterCard their "Worst Card in America" and paraded it in a series of press conferences and news releases promoting their November issue.
What's it worth to rebuild your credit?
That's the question Beacom asked when speaking to journalists in the days after the report, all eager to hear a soundbite from another embattled bank executive. Except Beacom doesn't sound like he's under attack. Even though the financial crisis of the past few years hit his own company hard -- Premier Bankcard downsized from 3,000 employees to 2,200 -- the CEO admits something that has become almost unfashionable for a bank president to say: they're in it for the money.
KELO-TV reporter Angela Kennecke interviewed Beacom shortly after the consumer publication made its proclamation. Beacom remarked that his company must set high rates to remain in the business of offering credit cards to consumers with low credit scores. He also noted that many of the fees cited by Consumer Reports can vary based on current promotions, but that federal regulations require the bank to supply the costs for "worst case scenarios." Even with demand for subprime credit cards declining overall, Beacom revealed that his company still receives 300,000 credit card applications per month while issuing only 40,000 accounts each month.
First Premier Bank takes a significant risk on every card it issues, hence the crazy upfront fees. But if you've just suffered through a bankruptcy or another severe personal financial crisis, adding an unsecured MasterCard to your credit profile could give you just enough of a credit score bump to qualify for slightly better pricing on insurance or for a better chance at landing a new job. Even though prepaid, debit and secured credit cards enable Americans to rent cars and buy plane tickets, many more of the things we take for granted rely on data in our credit profiles.
Not every one of Beacom's customers uses their second chance to succeed at managing money. The fees Consumer Reports hates so much offset the losses Premier Bankcard incurs when customers default, at a significantly higher rate than Beacom's mainstream competitors. The Credit CARD Act already forced First Premier Bank to change its marketing, but it's ultimately up to consumers to decide whether the benefits of holding a MasterCard outweigh the costs of paying hundreds of dollars in service fees.