Credit Card Companies Targeting Struggling Mortgage Holders

As subprime borrowers began to default on their mortgages in rapidly growing numbers this year, credit card issuers increased their efforts to sign up such customers with tarnished financial histories, according to a market research firm.

Direct mail credit card offers to subprime customers in the United States jumped 41 percent in the first half of this year, compared with the first half in 2006, according to Mintel International Group. Direct mail offers targeted at customers with the best credit fell more than 13 percent.

As home values decline and lenders balk at writing subprime mortgages, these customers can no longer refinance and tap into home equity for cash. That leaves credit cards as their only option.

For credit card companies, the subprime market is a profitable one, analysts and consumer advocates say. Subprime customers, charged higher rates than those with better credit, are more likely to make minimum payments, maintaining balances that generate interest revenue for card issuers, consumer advocates said.

Credit card issuers have a successful record of managing the risk of lending to subprime customers, using sophisticated computer models to determine fees, interest rates, and lines of credit, industry analysts said.

23 Responses to “Credit Card Companies Targeting Struggling Mortgage Holders”

  1. Future Millionaire » Credit Card Blog Says:

    […] CC Blog has a brief rundown on credit card companies’ recent targeting of struggling homeowners as new customers. With the real estate market being what it is, credit card companies are pitching their products as a viable cash alternative. […]

  2. Richard Couchepin Says:

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  3. Emily Carvalho Says:

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  5. Credit Card Today - Lucy T Says:

    It does seem like frankly unscrupulous behaviour by these companies. However no one is forcing these consumers to take out cards. Credit cards can provide a valuable way of managing short term cash flow and a great way to improve impaired history. Having said this lending money to people who frankly don’t have the organisation or resources to pay it back is what caused the crunch in the first place so maybe not as smart on the part of the issuers as it might seem.

  6. Pension Says:

    It seems these credit card companies are continually advantage of the financially vulnerable - it’ concerning.

  7. Jet Spyke Says: