For the past three years consumers with less than perfect credit have found it difficult to qualify for credit cards. As the credit crunch loomed, banks and credit card companies tightened lending standards; and for consumers with bad credit, it became next to impossible to qualify.
Now, as the economy begins to experience a small recovery, some credit card issuers have stepped back into the subprime credit card market and consumers with less than perfect credit are once again being targeted.
Credit cards for less than perfect credit are making a comeback.
According to CardHub.com, credit card solicitations to consumers with FICO scores between 620 and 680 have risen up to 300% since June. What’s behind the sudden change of heart? The answer is revenue.
Prior to the credit crunch subprime credit cards generated huge profits for banks from higher interest rates and fees. Subprime consumers can build up bank revenues. Easier credit standards may be good news to many consumers who had little to no access to credit cards. But the new access to credit will come at a cost.
Annual percentage rate (APR) continues to rise for all types of credit, good or bad. Since 2009, all credit card offers come with variable rates. Having a variable rate means that as the prime rate rises, the annual percentage rate (APR) will also rise.
The interest rate on credit cards offered to subprime borrowers will average 18.22% while prime borrowers average 12.95%. Banks have been working on ways to circumvent the Card Act of 2009 which interest rate increases and bans unfair and deceptive business practices.
Consumers with less than perfect credit could experience new fees in addition to higher fees. Cash advance and balance transfer fees have risen. Additionally, consumers could pay a fee for receiving a paper statement and even pay a fee for calling customer service excessively.
The average credit line is from $300 to $500 for subprime borrowers as banks do not want to take on too much risk. However, consumers making on-time payments may qualify for a larger credit line after 6 months of consecutive payments. During the credit crunch, consumers with less than perfect credit had to make 12 months of consecutive payments before requesting a credit line increase.
More banks will re-enter the subprime market offering credit cards for consumers with less than perfect credit as they have already inundated prime households with credit card offers. According to Synovate Mail Monitor, a market research firm which tracks direct mail volume, credit card solicitations reached 2.73 billion last year, which is nearly double from 1.39 billion in 2009.
The First Access Visa® Card carries the prestige of being a Platinum Visa. It is an unsecured credit card designed for consumers with poor or limited credit histories. Build positive credit by using your credit card responsibly. Your on-time payments will be reported to the major credit bureaus.