My opinion on SubPrime CCs and why there are NO CLIs.

[Anonymous]

How many of you tried to get the subprime CCs to up the $250-$300 CL by maxing out the card and PIF each month trying to show you are a good credit risk?

My opinion of subprime CC's goes like this. The limit of $250-$300 is right around enough credit but not enough at the same time. Lets say they make 1.5% on your swiped transactions. About $3.75 in transaction fees. Now lets say you go over your limit and they can charge you a over the limit fee of $29.00 + about $3.75 in transaction fees. Now you became more profitable. It is looked down upon to go over your limit but I believe while subprime lenders verbally tell you they don't want you to go over they keep on allowing it don't they.... Think about this. And this is why I think some subprime lenders do not want to give CLIs.

[treski]

You read my mind.  A regular $29 profit is worth a mere $300 risk, too.

[MsKiwi]

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treski wrote:

You read my mind.  A regular $29 profit is worth a mere $300 risk, too.

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If you also include the set up fees,AF, online payment fees, and account maintenance............they never lose that $300. 

[laz98]

well, i've never tried to do that with my cards, but all of them have granted me 2 CLIs each.....small ones, but CLIs none the less. i carry a balance all the time.

[Anonymous]

While I do agree that the very subprime cards that charge his fees are probably charging that upfront because it limits their investment in the event you don't pay, I don't necessarily agree that they intentionally keep limits low to entice you to spend over your CL. 

If you are going over your $300CL, you are raising red flags. I'm sure many folks do do this in the sub-prime market, but those that are genuinely trying to rebuild credit, really shouldn't be coming close or running over their CLs. My personal opinion is that when you have a $300CL, it should be pretty darn easy to keep track of your spending. I mean, if you know you have used 1/3 of your CL just by filling your gas tank, your best bet is to limit your spending until you make a payment (and it clears). There really isn't any reason to go over the limit...  Disclaimer: I know we are all human and make mistakes and I'm not referring to cases of  temporary brain fart - forget to send in payment - bank error - etc.

The subprime market has got to be challenging to manage. Sure people want to be given a chance, but the lender doesn't want to give too much, too soon especially to those that have already proven to be a past risk. Let's not pretend that those going over their CL and paying the $29 fees, etc. each month are not a cash cow for the CCC. No denying that. But, at the same time, if they were to raise limits on those same folks even a few hundred bucks and those folks charged up the balance and ditched out on the bill, they WOULD be losing a lot of $. And, folks in the sub-prime market are more likely to do something like that... So, I think it's more of a damned if you do and damned if you don't type of thing when lending to this particular market.

In my experience, I had an easier time getting CLIs on my sub-prime then with BofA. I'd love to figure that one out. Care to make that one your next experiment, Pizza?

Message Edited by UpUpUp on 09-19-2008 06:37 PM

[haulingthescoreup]

My take on it is that there is no particular incentive for starter and re-starter cards to give CLI's, or even to keep existing customers.

Current cardholders who have improved their profiles and scores and learned to manage their credit become educated consumers, wanting CLI's and fee waivers. They're also less likely to carry balances (= pay interest) and go over the limit (= pay penalty fees), so they become less attractive as customers.

There is an apparently endless supply of new applicants to serve as replacement customers, so the sub-prime cards might as well refuse all requests and let you close them. They're not really losing anything.

Crutches are useful when you're newly banged up and limping around. Once you're able to walk, there's not a whole lot of point in getting a prettier crutch.

There are exceptions to this, of course, and one was posted above. But as a rule, their refusal to do you any favors might be a message that it's time to move on.

And BTW, this is a very good reason for someone in credit recovery to only have a couple of cards. Take immaculate care of them for 6 - 9 months, and see what's happening with your scores, and see if you're ready to bump up a level (BofA or CU secured, Wells Fargo, a better Cap One card, etc.) When you have a lot of starter cards, it can be hard emotionally to let go of them. Until they just become so incredibly awful that you're ready to say buh-bye!

[smallfry]

Hauling I agree totally that rebuilders should limit their stable to a couple of cards. Got my SO an Orchard and a Cap One kept the cards for small purchases for a couple months then decided to let the cat out of the bag. Mistake. Within a few days the cards were nearly maxxed out. LOL. I retain the right to make minimum payments but it is frustrating to say the least.

[haulingthescoreup]

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@smallfry wrote:
Hauling I agree totally that rebuilders should limit their stable to a couple of cards. Got my SO an Orchard and a Cap One kept the cards for small purchases for a couple months then decided to let the cat out of the bag. Mistake. Within a few days the cards were nearly maxxed out. LOL. I retain the right to make minimum payments but it is frustrating to say the least.

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It can be so hard to reprogram yourself to get brutally realistic about credit, and learn to step away from that thrill of buy, buy, buy! You're right, with two cards, you can only be dumb with two bills at once. Whereas with 8 cards, whoa....

[Anonymous]

I agree with this as well!

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@haulingthescoreup wrote:

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@smallfry wrote:
Hauling I agree totally that rebuilders should limit their stable to a couple of cards. Got my SO an Orchard and a Cap One kept the cards for small purchases for a couple months then decided to let the cat out of the bag. Mistake. Within a few days the cards were nearly maxxed out. LOL. I retain the right to make minimum payments but it is frustrating to say the least.

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It can be so hard to reprogram yourself to get brutally realistic about credit, and learn to step away from that thrill of buy, buy, buy! You're right, with two cards, you can only be dumb with two bills at once. Whereas with 8 cards, whoa....

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[MsKiwi]

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haulingthescoreup wrote:
My take on it is that there is no particular incentive for starter and re-starter cards to give CLI's, or even to keep existing customers.

Current cardholders who have improved their profiles and scores and learned to manage their credit become educated consumers, wanting CLI's and fee waivers. They're also less likely to carry balances (= pay interest) and go over the limit (= pay penalty fees), so they become less attractive as customers.

There is an apparently endless supply of new applicants to serve as replacement customers, so the sub-prime cards might as well refuse all requests and let you close them. They're not really losing anything.

Crutches are useful when you're newly banged up and limping around. Once you're able to walk, there's not a whole lot of point in getting a prettier crutch.

There are exceptions to this, of course, and one was posted above. But as a rule, their refusal to do you any favors might be a message that it's time to move on.

And BTW, this is a very good reason for someone in credit recovery to only have a couple of cards. Take immaculate care of them for 6 - 9 months, and see what's happening with your scores, and see if you're ready to bump up a level (BofA or CU secured, Wells Fargo, a better Cap One card, etc.) When you have a lot of starter cards, it can be hard emotionally to let go of them. Until they just become so incredibly awful that you're ready to say buh-bye!

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I agree. I'm not advocating  coming anywhere close to the limit on a low limit subprime cc. My point is that they are making money off the fees and since the are rebuilders and in the business to make money they probably rarely lose money on  many customers. I could be wrong on this but I would think their exposure is limited.  There will always be a steady stream of customers who need them.

So far I've been lucky to receive fairly decent cli's from the couple of subprimes I have. They are serving a purpose of rebuilding while I try to repair what I can. I am giving myself a time line with these cards and hopefully will be able to graduate to better cards within the next year.