Latest Look at Credit Card Landscape Reveals Better Offers, Looming Danger - Page 3
Lack of Competition in the Bottom of the Credit Spectrum
The Great Recession emphasized to credit card companies how risky of a proposition it is to extend credit to inexperienced consumers or those who have histories of irresponsibly managing their finances. And since the CARD Act limited the fees that issuers can charge such consumers, thereby making it more difficult to mitigate risk, many credit card companies have since displayed a reticence to offer cards to people at the bottom of the credit spectrum. The resulting lack of competition in the space, compounded by Capital One’s purchase of a sizeable portion of HSBC’s US credit card business, which included the Orchard Bank brand that was targeted to people with damaged or no credit, has led to increased rates.
More specifically, while interest rates for most consumer segments have stabilized with the continued economic recovery, the average APR for secured credit cards has risen 7.74 percent, and student credit cards have seen a 3.10 percent bump in rates. This trend has further emphasized the importance of building solid credit as quickly as possible and avoiding debt early in one’s credit career.
Ultimately, we can learn a lot from a detailed analysis of the credit card market, and the insights we’re able to glean can help improve our financial performance moving forward. In particular, the willingness credit card companies have shown to cater product terms to the specific wants and needs of the best consumers following the Great Recession should underscore the importance of managing our finances responsibly. Of course, this is not always possible, but the fruits of disciplined spending are obvious.