Why Are Store Cards Considered Subprime?

[Brian_Earl_Spilner]

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@sarge12 wrote:

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@Brian_Earl_Spilner wrote:

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@sarge12 wrote:

@ Brian_Earl_Spilner

Payday loans do not normally report to the CRA's at all...just stupid high interest. Consumer finance accounts however will ding a credit score.

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thats the term I was looking for "consumer finance account". I wasn't talking about a normal payday advance, I was talking about their installment loans, the ones where you take out $3k and end up paying back $10k after one year.

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In that case it might not be reported...but should be...with STUPID person at the top of the report in big capital letters. Any lenders that charge that much interest should be in jail IMHO!

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They do report to the bureaus. It also appears to be more affordable than I thought. 😂😂😂

[sarge12]

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@Brian_Earl_Spilner wrote:

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@sarge12 wrote:

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@Brian_Earl_Spilner wrote:

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@sarge12 wrote:

@ Brian_Earl_Spilner

Payday loans do not normally report to the CRA's at all...just stupid high interest. Consumer finance accounts however will ding a credit score.

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thats the term I was looking for "consumer finance account". I wasn't talking about a normal payday advance, I was talking about their installment loans, the ones where you take out $3k and end up paying back $10k after one year.

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In that case it might not be reported...but should be...with STUPID person at the top of the report in big capital letters. Any lenders that charge that much interest should be in jail IMHO!

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They do report to the bureaus. It also appears to be more affordable than I thought. 😂😂😂

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218% interest is still beyond ridiculous. It is also taking advantage of what is obviously desperate people. I really do not see how these modern day loan sharks can sleep at night. If there is justice, someday the owner of this business will wind up dead broke and have to borrow at the same interest rate just to eat. Since it would violate this sites TOS to say what I really think of these blood suckers, I'll leave it there.

[redpat]

Try telling my DW that store cards are subprime......I dare you.

[UncleB]

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@sarge12 wrote:

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@digitek wrote:

I think main issue that hasn't been brought up is that you can only use them at the store in question.  This makes them not quite as useful, and they will probably change your spending habits to favor that store.

Also, not sure why, and this might be myth, but I have read it multiple times is that when insurers pull your credit report they will actually take stores card into account in a negative way.

And about Langley FCU example I am not sure what your total amount of credit is, but that might be the issue at play here.  If your total is high relative to your income and you have low utilization they have to wonder why you'd want the money...

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Langley CSR actually explained the denial to me. Since I usually PIF all cards before they print a statement, it looks as if I have many credit lines with limits over 10k that shows 0 as the highest statement balance ever. They did not wish to provide me a LOC I had no intention of using. In fact, it would only be used if I somehow made a mistake on my balance...which I never have. Another CU I have an account at recently closed my LOC due to non-use, but re-opened it at my request with a 2500 limit vs the previous 5000. I was just somewhat surprised that the actions taken to keep a very low utilization actually caused a denial when their credit pull for me was 826 fico08 from equifax. I am not upset about the denial and I really did not need the LOC. I am almost always denied a CLI for the same reason...I am only using a tiny fraction of my existing credit limit. So, anyone who thinks 800+ scores are a golden ticket to approvals...it's not!

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We've seen several instances recently of people playing the AZEO game in perpetuity 'just because' and having similar consequences, so your experience isn't unheard of.

I think there's a time/place for AZEO (before a mortgage, etc.) but IMO it's overkill to do it all the time. 

I have balances regularly reporting on around a half-dozen cards and my scores are still north of 800 on all bureaus.  My lenders (and prospective lenders) get to see that I can handle carrying a balance, and they don't get jumpy if I choose to take advantage of a 0% offer and let a balance ride for a little while.

[UncleB]

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@sarge12 wrote:

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@Brian_Earl_Spilner wrote:

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@sarge12 wrote:

@ Brian_Earl_Spilner

Payday loans do not normally report to the CRA's at all...just stupid high interest. Consumer finance accounts however will ding a credit score.

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thats the term I was looking for "consumer finance account". I wasn't talking about a normal payday advance, I was talking about their installment loans, the ones where you take out $3k and end up paying back $10k after one year.

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In that case it might not be reported...but should be...with STUPID person at the top of the report in big capital letters. Any lenders that charge that much interest should be in jail IMHO!

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I don't think it's fair to label people who take out those kinds of loans as 'stupid'.  I'm sure there are some who clearly understand the terms but simply don't have any better options (and doing without isn't an option, either).

That said, we're starting to stray a bit from the topic...

[UncleB]

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@Anonymous wrote:

Someone posted in another thread that store cards are often subprime cards. What makes them subprime, the interest rate? Or is it the lender that issues the card?

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Getting back to the topic of the thread...

@Anonymous, prime and subprime are completely subjective when used in this manner.  A card or lender that is clearly 'subprime' to me might be 'prime' to another user. 

I've saved over $200 this year alone with my Lowe's store card, so that's definitely a 'keeper', while I have cards with banks many around here would consider "prime" that are next to useless (I'm looking at you, Citi). 

As with most things, moderation is the key.  I agree with others who have stated that having (and using) a store card at places you shop at anyway to get a discount, perk, etc. is often worth it.  On the other hand, getting a wallet-full of useless plastic just because you can is obviously not worth it (short term or long term). 

[sarge12]

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@UncleB wrote:

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@sarge12 wrote:

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@Brian_Earl_Spilner wrote:

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@sarge12 wrote:

@ Brian_Earl_Spilner

Payday loans do not normally report to the CRA's at all...just stupid high interest. Consumer finance accounts however will ding a credit score.

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thats the term I was looking for "consumer finance account". I wasn't talking about a normal payday advance, I was talking about their installment loans, the ones where you take out $3k and end up paying back $10k after one year.

---

In that case it might not be reported...but should be...with STUPID person at the top of the report in big capital letters. Any lenders that charge that much interest should be in jail IMHO!

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I don't think it's fair to label people who take out those kinds of loans as 'stupid'.  I'm sure there are some who clearly understand the terms but simply don't have any better options (and doing without isn't an option, either).

That said, we're starting to stray a bit from the topic...

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Yeah, I agree it was a poor choice of words. Desperate would be more fitting. I do so hate that lenders take such advantage of people in their most desperate times...but I'm sorry I used that as a description. If faced with paying such ridiculous interest or watching a family member go hungry, I can see making that choice myself.

[redpat]

Well, I tripled dog dared myself and showed DW this thread and her response was “Men, they’re all idiots and don’t they have anything better to do”, and that’s when the fight started.  She said that her store cards give her great discounts and special promotions, then reminded me that we got $100 off when she made me get a Macy’s card (now closed), but her’s is still open.  I really hate that they remember everything.  I couldn’t argue her points.

That was some fun breakfast conversation. 

[UpperNwGuy]

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@redpat wrote:

Well, I tripled dog dared myself and showed DW this thread and her response was “Men, they’re all idiots and don’t they have anything better to do”, and that’s when the fight started.  She said that her store cards give her great discounts and special promotions, then reminded me that we got $100 off when she made me get a Macy’s card (now closed), but her’s is still open.  I really hate that they remember everything.  I couldn’t argue her points.

That was some fun breakfast conversation. 

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Women focus on the discounts, while men focus on card counts, APRs, credit limits, and FICO scores.  Your wife is a smart woman.

[Loquat]

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@Anonymous wrote:

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@Physh1 wrote:

They are considered subprime because borrowers with a poor credit history can get them without the strict underwriting 'prime' cards have & the interest rates are usually sky high.

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Subprime is used very loosely around here, but the above is really the test.  If a card can be obtained by someone with low scores (who could only get a subprime mortgage if at all) then it is subprime.   It's really the card rather than the issuer, e.g. Chase Freedom and American Express charge cards can be approved with fairly low scores, whereas other cards in their collections need a much higher score.

That said, IMO store cards are overly hated here.   If you don't PIF, then yes, the large APR is bad, but then you should PIF when possible!

If a store card offers a good deal on stuff you actually use, then it might be much more useful to you than a generic bank card.

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+1.  If we judge prime vs. subprime on poor scores alone then we can lump Navy Federal in with the store cards because they've been known to dish out really high limits to folks with substandard credit (I was one of those folks they handed a large line to!)