Credit Cards

Tips, news, reviews, caveats, trends, updates and analysis related to consumer and business credit cards, and prepaid debit cards. From the interest rate specialists @ FedPrimeRate.com

Friday, August 14, 2009

Subprime Credit Cards Are Still Profitable, So They Aren't Going Away

Subprime credit cards are here to stay...With the country in a deep recession, and a new law that has many banks concerned about the profitability of their credit card products, you might be thinking that subprime credit cards are on their way out. To the contrary: it seems that subprime cards are performing relatively well for certain banks, thank you very much.

Consumers who have a limited credit history or no credit profile at all, and those who have bad credit, may be glad to know that subprime cards are still profitable for banks, so they aren't going to die out any time soon.

Here's a clip from a recent Wall Street Journal article:

"...British bank HSBC Holdings PLC, which has a large portfolio of U.S. credit-card customers, now generates better results with its subprime credit-card businesses than the portfolio that includes more-creditworthy customers, North America Chief Executive Brendan McDonagh said in a conference call Monday.

HSBC's subprime credit-card customers generally have lower credit limits than prime customers, averaging less than $500, and are defaulting at a lower-than-expected rate. The reason: For many of those borrowers, a credit card is their only form of noncash payment.

About a quarter of HSBC's $41 billion credit-card portfolio is considered subprime, and the delinquency rate on that is 10%, a 21% increase over last year. But because of higher interest rates charged to these borrowers, HSBC says that business is profitable.

One reason prime delinquencies are up is rising unemployment. When these borrowers lose their jobs they typically focus on making their mortgage payments and, because they tend to have multiple credit cards, they are more likely to let some of them default..."

Labels: ,


>  SITEMAP  <





FedPrimeRate.com
Entire Website © 2017 FedPrimeRate.comSM


This website is neither affiliated nor associated with The United States Federal Reserve in any way.
Information in this website is provided for educational purposes only. The owners of this website
make no warranties with respect to any and all content contained within this website. Consult a
financial professional before making important decisions related to any investment or loan
product, including, but not limited to, business loans, personal loans, education loans, first
or second mortgages, credit cards, car loans or any type of insurance.