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AF Theory?

Frequent Contributor

AF Theory?

Do you think some lenders approve AF CCs more frequently than non-AF cards? It would seem logical, but kind of wanted to know what you guys think.
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Established Contributor

Re: AF Theory?

subwaysandwich wrote:
Do you think some lenders approve AF CCs more frequently than non-AF cards? It would seem logical, but kind of wanted to know what you guys think.

I haven't noticed a difference in the underwriting criteria between AF and non-AF cards to be honest. In most cases, the risk of CC default (in the thousdands of dollars) far outweighs the marginal benefit (~$100) received from a AF.

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Re: AF Theory?

There are two different kinds of AF cards.


The first category are the sub-prime cards that charge hefty AFs with no real benefits in order to mitigate their risk. You have the worst-case examples of this where the fees almost exceed the CL. Then you have banks like CapitalOne that charge moderate fees for cards that even people with bad credit can get. So for these, yes, I would agree that they have more lenient policies then they might have for no-AF versions of the cards. 


The second category, which I assume you were referring to, are the prime and super-prime cards that charge AFs to help cover the expenses in the benefits they offer. For these cards, I think the AF is simply a cost recovery mechanism in many cases. They also likely use it as a way to weed out people who would scoff at the idea of paying a fee, as these people may not be otherwise profitable for them. You have the $50-100 typical cards, which offer marginal to good benefits, and then the $450 cards that offer very good benefits (for people who can use them). 


But to answer your question, I don't think the UW criteria would differ too much, or more specifically that they AF would play a roll in it. If anything, since these cards are generally Signature level or better, I would say they would likely be more strict, not less so, in credit criteria. Again, we're talking about prime+ cards. 


I don't know if any studies have been done on this, but even if they were I think they would be flawed. I say this because, IMHO, the people who are applying for prime+ cards generally have prime+ credit, making them more likely to be approved. Whereas the people applying for sub-prime and even near-prime cards have anywhere from horrible to marginal credit at best (generally). So the decline rate would likely be higher for those types of cards. When you factor in the AF, especially the $100+ ones, it makes it even more likely that the applicant would have better credit. 


So from that perspective, I would say that AF prime+ cards would be more likely to approve their average applicant, but not for the reasons I assume you are asking about. 

Limits: PRG=NPSL, CSP=$16k, BCP=$30k, DIT=$15k, USAA=$6k, CDW=$12.5k, IHG=$9k, BBY=$2k, BOA=$13k
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