05-04-2011 02:29 PM
I recently applied for a Barclay's Lufthansa World MasterCard. Here's how it hit my bureaus:
Remarks: Flexibile Spending Credit Card
Credit Line: 6300
Equifax & TransUnion
Remarks: Credit Card
Credit Line: 6300
I have since canceled the card after reading Lufthansa's fine print so I never got to use it, but I'm curious how big the dent in my score would be if I exceeded my CL.
The exceeding the CL option was in the agreement.
I have come across alot of posts on this issue, but I haven't seen yet any posts about the reasons for these card's existence.
Banks prefer issuing Visa Signature Cards and World MasterCards to their creditworthy customers because the can issue a low credit line (read exposure) but still allow the cardholder(CH) to exceed it if their credit score is high enough. The main reasons these cards exist at all is because banks don't have to hold reserves against otherwise huge credit lines that would be issued if the CH had a Platinum Visa, etc. This way, banks can use that reserve money for loans and make much more profit. Who do you think came up with the idea to issue Visa Signature & World MasterCard cards? The banks! The processors just provided what the banks asked for: lower credit lines to increase reserves but still have the ability to allow CH to charge as much as they want.
Follow the money!!!
These accounts are being reported as "Open" accounts. Some banks will report a CL, some won't. It all depends on how they key the information into Total Systems.
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