The more you spend, the more you will get - that seems to be the punch line for most credit card companies. Credit cards seem to have risen from the ashes after the recession. Mailboxes are full of tempting offers. Eligibility criteria are having a high credit score, but an average or bad credit is a strict no-no. Especially after the recession, credit card companies are more cautious with their offers due to the high default rates. With the economy back to normalcy credit card companies are back with offers that were withdrawn. But the aggression in marketing seems to have disappeared due to the high revolving credit and charge-off rates in recent times.
The Larger Picture
According to a weekly rate report on September 22, 2010, the annual percentage rates (APRs) have increased, with new card offers having an average of 14.14 percent. Richard Bialek, CEO of Bialek Group has stated that the fallout was due to the new Federal Reserve rules as well as the credit card act. Purchase rates are going up and it is the same with balance transfers and fees. Gaurav Gupta from Novantas has also stated that there is an increase in APRs, cash withdrawals and transaction in foreign currency.
The direct fallout of this means:
Having good to average credit with a credit score of about 680 upwards one could avail an APR in the range of 10.9 percent to 13.9 percent, which is the variable rate. The Annual Fee would be 0 to $175 based on rewards.
People belonging to this category are generally flooded with credit card offers as a high credit score is directly proportional to the generous offers from credit card issuers. Super prime segments are those with FICO scores of over 720 to 750. Better rewards and better product features work in this segment as it means more value for money. Creditworthiness of customers and spending patterns are taken into account and offers are tailor made to suit their needs.
However, having an average credit with a credit score of 600 to 680 means one could avail an APR of 13.9 percent to 19.8 percent, which is the variable rate. The Annual Fee would be 0 to $175 based on rewards. With a credit score of 600 and above obtaining a card from any major credit card lender is not difficult. But the fallout from the Credit Card Act is that rates cannot be raised without notice.
With poor credit that is a credit score of 600 or lower the APR: 19.9 percent to 29.9 percent, which is the variable rate. The Annual Fee would be 35 to $120 based on rewards. Poor credit means fewer options as credit card companies are much more cautious in issuing cards to this segment.
It would be a better option to bring about changes by switching over to a different business module wherein companies make money minus the risks. The Credit Card act as well as the economy has been responsible for these changes.