Bankruptcy

Gap in Cost of Credit for Haves and Have-nots Broadens Further

By Nathalie Martin

I can remember when the Card Act  first came out. Many professionals, including some of my colleagues, bemoaned the loss of perks for the well-healed. They were all sure that from now on, since the card companies could no longer boost rates on existing balances or in the first year of a card relationship, or charge more than $25 in late fees, annual fees for all were going up and points and other perks were going down.  Did it happen? Nope. At least not for the good credit risks. Quite the contrary.

An AP story  that ran in many papers across the country today confirms a trend toward very beneficial credit deals for the rich. The story reports that while people with excellent credit used to get 44% of all offers mailed, they now get 64% of those offers. The offers are also better than ever for this demographic. One premium card offers five times the typical rewards and waives the annual fee for people with $50,0000 in the bank. Some of the balance transfer cards offer 18 months without interest! Some cards even eliminate those irritating foreign transaction fees. No doubt, the lenders plan to make their money on merchant fees on these cards, since many in this demographics don?t pay late and don?t carry balances. 

Offers to the well-off but less fastidious in credit cleanliness are worse than before. These B-listers are getting card offers at higher interest rates and higher annual fees than before. This is the demographic from which card compares will make up for lost fees resulting from the Card Act. As for the ones with poor credit habits and little funds? They are getting fewer offers, period.

Full post as published by Credit Slips on March 06, 2011 (boomark / email).