Subprime Credit Card

A subprime credit card is a credit card designed for people with bad credit or who have yet to establish a credit history. Many major credit issuers, as well as smaller financial institutions, offer a subprime credit card. The subprime credit card traditionally carries higher fees and or higher interest rates which make up for the increased risk involved in such lending. Interest rates on a subprime credit card can start around 10% but can run 30% or higher. A subprime credit card can carry terms of agreement which will cause the interest rate to increase dramatically if a payment is late or the cardholder exceeds his or her limit. In some situations, a subprime credit card may help a consumer improve poor credit scores. Most subprime credit card companies report to major credit reporting agencies such as TransUnion, Experian and Equifax.

After the loosening of lending regulations in the 1990s credit card companies in the United States began offering their subprime credit card to borrowers, but by 2002, as the U.S. economy slowed, many issuers saw increased default rates from subprime credit card holders and were forced to close their doors. In 2007, a new generation of subprime credit card began to appear on the market. As more of these vendors emerged, the market for subprime credit card industry became more competitive, forcing lenders to make their cards more attractive by lowering interest rates.

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