Major credit card issuers are flush with cash and now targeting people who may have been on the lower end of the credit scale as recently as a few months ago.
When the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 went into effect, the biggest banks that control the bulk of the nation’s credit card portfolio went into panic mode. I was getting constant calls from people about their lines of credit being reduced or shut off altogether without notice.
Following that phase, the credit card issuers went into a defensive crouch position and really dialed back on sending out solicitations through the mail. (That alone accounted for part of the problem with the United States Postal Service’s budget deficit!)
Then in the second half of last year, the solicitations again started coming great guns. Yesterday my wife and I got 6 solicitations at our house in a single day. We used to go weeks without getting any in the mail, mind you. It’s funny because Lane and I both have our credit frozen, but that has not slowed the solicitations.
People with what’s termed “less than perfect credit” in the industry are being targeted especially hard with the new rounds of solicitations. “Less than perfect credit” effectively means people with credit scores of between 620 and 660, according to Money magazine. So those same people who were redlined out of getting credit just a few months ago are now getting offers from the major issuers. But there are a few big differences from the boom days of easy credit:
- First, the limits are much lower than in the past. Think in the many hundreds of dollars instead of the many thousands, like a credit card with training wheels.
- Second, all of these offers seem to come with annual fees that are in the range of the upper teens to $40 a year. It may be expressed as a monthly charge of anywhere from $1.50 to $3.
- Finally, these new offers have high interest rates, typically in the upper teens to 20%.
So the offers are back, but it’s a new day to be sure. And it’s a clear sign to me that the pendulum is swinging back away from fear about lending. But it’s not swinging back to reckless lending…at least not yet.