Wednesday, October 18th, 2017

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Credit Card Companies and Banks Targeting Riskier Borrowers Again

Credit card companies are beginning to lend again to risky borrowers, although in most cases with much stricter guidelines.After the recession struck in 2007, credit card companies and banks suffered massive losses as consumers defaulted on their payments. Since then, they have been wary of lending to consumers, but recently there has been an uptick in credit card offers, according to the New York Times.

Some borrowers who were turned down as recently at this past June are now being offered credit cards as banks slowly expand their credit card offerings to riskier consumers. However, now banks and credit card companies are setting much stricter guidelines for picking lending customers and setting the terms of deals.

Borrowers defaulted for myriad reasons during the recession and now credit card companies hope to identify consumers that may have had financial troubles in the past but still have money to pay their bills. Banks have begun to label consumers in defined categories like "sloppy payers," "first-time defaulters" and "strategic defaulters" to better categorize their chances of not paying their bills.

Since 2007, lenders have clocked $189 billion in credit card losses, according to Oliver Wyman Group. Whereas credit cards accounted for nearly 25 percent of banking profits, the financial crisis all but eliminated those profits and now they are hoping to lure back in consumers through attractive offers.

Be careful, though, if you take out a new credit card as many of the new ones have higher interest rates and annual fees. So far, 4 percent of these risky borrowers have submitted applications for credit cards. 

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