Thaindian News

By Ranjan Bhaduri
Jan 13, (THAINDIAN NEWS) The memory of the sub-prime mortgage market in USA collapsing like a pack of cards and triggering one of the worst financial disasters of USA is still afresh and US economy has just survived the after effect. However, the market trends indicate that the same thing can happen with credit cards. After the great US recession of 2008 the banks have played it safe with sub-prime borrowers and poor credit score holders. They have been skeptical and reluctant to let these people borrow money in the last two years. However, in recent times credit card offers are being sent to people who have FICO scores below 650. The industry sources say that HSBC and Capital One are mostly seeking the sub-prime borrowers as they can charge those borrowers with higher interest rates and fees.

This may remind one of the well known saying “history repeats itself because people forget?” As a matter of fact, Subprime has been an area of interest for the banks since it fetches them more revenue compared to those belonging to the credit-worthy customers. They can charge the subprime borrowers with steep annual charges and higher rates of interest. On an average the major lenders get close to 70 percent of their profit from the sub prime category borrowers.

HSBC on its part has said that it is “selectively increasing marketing activity” in its credit card wing since the credit conditions are improving. The other banks also seem to follow the same route. Asa result sub prime and near prime customers are getting solicitation mails these days. The banks are also offering some lucrative deals to woo this segment of borrowers.