@Macbookguy wrote:
I know this is a fairly old post, however I wanted to share my two cents. I found this post while Googling "Comenity Bank Cards" because I was looking for a list of every card they back. I have a few of their cards and while I have never really had a problem with them - I don't really want to have a lot of their cards. I currently have Pier 1, Pottery Barn, Victoria's Secret, Overstock, and a Total Rewards Visa. I have combined about $10,000 of available credit with them.
What I'm about to say is not meant to be accusatory towards anyone and is in no way defending Comenity. I think before any bank closes your credit card account they should be required by law to notify you in advance of the closure, not after. What they are most likely looking for is a phenomenon called Breakout Fraud. They do cast their net wide and they probably catch people that they shouldn't but the majority of these accounts should be closed.
I work for a credit union and we use a feature through Experian that identifies our Breakout Fraud risk. Experian was the first (I believe) to coin this phrase, but it didn't take long for Equifax and TransUnion to jump on the boat. The typical customer who commits Breakout Fraud fits the following profile: 1) credit history is relatively new, usually less than five years with an average age of accounts being around six months old; 2) Fraudsters rarely have real estate loans, car loans, or other customary loans such as student loans; 3) Accounts are usually opened with high(er) credit limits in a short amount of time and the fraudster continually asks for credit line increases; 4) Very minimal amounts in relation to the credit line are charged to the cards and the balances are usually paid in full at the next statement cycle or even before the cycle is closed; 5) These particular fraudsters typically have higher credit limits that if they were to access there would be no way their income could support repayment.
Breakout Fraud occurs typically around 18 months after the first credit line was opened. Cardholders repeat the cycle of small charges on their credit cards followed by paying in full. Once the accounts are at their maximum credit limit, the fraudster then maxes out the cards. They may also write bad checks for payments or to create credit balances on the accounts to overinflate their credit limit and then leave the bank with higher risk exposure than their original credit limits. This is why a lot of those starter credit cards from places like First Premier and Credit One make their customers wait up to 10 days before an EFT payment reflects in available credit.
Not every customer who fits in with the above is going to commit fraud. Think about it for a moment, however. Unless you are very high earning there is no way many of the people who have posted on these forums could repay this debt. One person alluded to the fact that he or she has hundreds of thousands of dollars in available credit. The average everyday consumer does not need this much available credit and is certainly a risk to every bank that has issued them a card. I will show you an example... Let's assume a person has $200,000 in available credit and decides to spend this money. For the sake of this example we'll say the person has a 10% interest rate spread on these cards (not likely but for illustration only). If the cards were maxed out, the monthly payment at the 4% typical minimum calculation would be around $8,000. Let's say this same person earns $100,000 per year gross, that's $8333 per month. The mathematical reality is not in this customer's or the bank's favor. This customer would file bankruptcy and leave the bank holding the bag.
Again, I didn't post this to be accusatory or to lecture anyone. I simply see it on a daily basis at work. I see people with credit lines their income could never support and they want more. I have had people apply for credit cards and when I asked them which of their credit lines they were going to close to offset the risk, they get offended. When I process applications and they get an automated approval for $5,000 or $10,000 they get mad like we've cheated them. When I ask them why they need credit lines so high they also become offended. I recently had a 30 year old server come in to refinance their car. When I ran their report they had over $150,000 in available credit on a spread of 28 credit cards. This person earned $23,000 last year.
Ask yourself why these banks have problems with these accounts that have perfect payment histories. It's not what has been done - it's what could be done.
***We call it Break Out Fraud however Experian and Equifax calls it Bust Out Fraud***
While I wasn't trying to commit fraud, but "what could be done" happened to me. When I look back on my BK, it actually could have been worse. My credit cards represented my "status". Even though I was not in the financial position I am now, I didn't care about saving anything ever. In actuality, I made good money for a young girl that age, but I didn't handle it well, I didn't plan. I could always charge it. Girl in her 20's, homeowner, no dependents, with 20+ cc, low limits, lots of store cards, high aprs and no sense of what if = disaster. In most cases, all it takes is one paycheck to be missed or mishandled and uhoh.
Lesson learned. At one time, I was stupid, but I'm no repeat offender lol.
Filing BK was the most humiliating experience I've ever been thru. The aftermath of considering buying a new car and worrying if I would be approved. On the bright side, it humbled me. I learned from it. I actively save now. Presently I make 6 figures. But I don't live like I make that kind of money. I live conservative and I charge conservative. I only have 3 cc now and they are very recent. There is one more on my bucket list, but other than that, I will grow the ones I have. I don't NEED more. The thought of having too many gives me pause. I know what could happen.
Thank you for your post!
