A March report from Equifax, the National Consumer Credit Trends Report,
shows that lending to sub-prime borrowers rose 41 percent in 2011 compared
to year ago levels. In addition, 1.1 million new bank cards were issued last
year to sub-prime borrowers, a four-year high.
The growth in the sub-prime category was much greater than the overall bank
credit card growth of 18 percent in 2011. This overall growth included 39.9
million new bankcards, the highest total since 2008.
New sub-prime card limits grew 55 percent for the period to $12.5 billion,
the highest level since $27.4 billion in 2008.
"After the crash in 2008, banks slammed on the lending brakes and only
people with excellent credit scores could get new credit," says Bill
Hardekopf of LowCards.com. "This growth in borrowing and lending
at all levels could be a good sign for the economic recovery. A significant
number of borrowers have paid down their balances and reduced credit
card debt to become a better risk for lenders. Regulations have also
hammered the issuers' ability to generate revenue, and the banks are
trying to find new ways to grow. These loans to sub-prime cardholders
have higher rates and fees, so they offer revenue growth opportunities
for the issuers."
According to Equifax, a credit score of less than 660 is considered
sub-prime. When someone with a sub-prime score is approved for a
credit card, the loan usually has a much higher interest rate and greater fees.
In order to build your credit score, it is important for a sub-prime
customer to choose a card that reports your payment history to the
credit bureaus--this can eventually raise your credit score if the card
is used responsibly and payments are made on time.
Here are some of the better cards for sub-prime customers:
* Orchard Bank Secured Visa reports to all three credit bureaus. The
minimum security deposit is $200. The rate for purchases is 7.99%,
* Capital One Secured MasterCard reports to the three major credit bureaus.
You can even earn credit line increases based on your payment and credit
history. This card requires a $200 minimum security deposit and your credit
line will be equal to your security deposit. The interest rate is 22.99%,
and the annual fee is $29.
* American Express Prepaid card does not charge recurring fees. There is
no annual fee, monthly fee or transaction fee. There is a $2 fee (plus ATM
owner fee) for each ATM withdrawal. American Express, known for targeting
high-income cardholders, aggressively entered the prepaid card market in
2011 and recently announced that it will give prepaid debit cardholders the
opportunity to upgrade to a traditional charge card if they exhibit good
payment practices as they use their card. This can help consumers build
up their credit score.
LowCards.com simplifies the confusion of shopping for credit cards. It is