Why Do Banks Turn Down Applications For Secured Credit Cards? – Credit Card Insider

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That'' s a very great concern.
In lots of cases, they ' re rejected. And all that, essentially what that'' s gon na
. It'' s a huge. It ' s a bad customer experience due to the fact that you'' re not delighted with them.

Video Transcript:

https://www.youtube.com/embed/N5dKzaRrdlE Hi. My name is John Ulzheimer, and I'' m a credit specialist who adds to creditcardinsider.com Today'' s concern is this … Why do banks sometimes deny applications for secured credit cards despite the fact that the candidate funds the credit line with a deposit? That'' s a very excellent question.
A great deal of individuals can ' t understand why some banks will actually reject applications for safe cards. Now, if you'' re not familiar with a protected card, here'' s how it works. Secured cards are typically for consumers who either have bad credit or no credit. And they'' re utilized either as a method to rebuild your report or to develop a credit report from scratch.What you will normally do is make a deposit from a bank, state $500, and then the bank will issue you a charge card with a credit limit equivalent to your deposit, or in some scenarios, a little more. So in the $500 scenario you might really get a credit card with a $500 credit line. The bank is completely secured with their extension of credit because you'' ve already made a deposit for the whole credit line. If you charge items or charge services and you refuse to make the payments, they'' ve currently got your cash, therefore they'' re just going to use that money and offset your charges.So what'' s a little counter-intuitive to some individuals is, why in the
world would they ever deny someone for that kind of charge card when they ' ve already essentially got all the payments prepaid beforehand? Well, here ' s the response to the concern … And.'you ' re right, not all protected card applications are approved. In most cases, they ' re rejected. Safe cards do not create a lot of income. for charge card companies, however in some cases they can create a lot of headaches for the card. provider. Consider somebody who has a charge card. with a limit of$ 10,000,$ 15,000 $20,000.
That is a really lucrative customer for a credit. You don ' t see many guaranteed'cards with limits.
of money down when you'' re opening the card. Due to the fact that you have such a little credit limitation,.
it'' s really unlikely that you'' re carrying a large balance from month to month, which.
methods that your not producing a lot of profits for the card issuer. If you'' ve got really very poor credit, and when.
I say really poor, I'' m talking credit ratings in the 400s and the 500s, which basically yell.
put on'' t work with'me since I ' m not gon na pay my costs on time. The credit card issuer still has no interest.
in doing company with you due to the fact that they understand you'' re not gon na make your payments. And all that, basically what that'' s gon na
. require them to do is to offset your charges with the cash that you'' ve already put down.
as a deposit, and then ultimately close your card and return the unused amount of the deposit,.
and then send you on your way.That'' s not an excellent experience for the.
They'' ve made little to no money. It'' s a big. It ' s a bad consumer experience because you'' re not pleased with them.
all it was an F in the consumer relationship report card. That'' s why some protected card companies will.
still reject you despite the fact that you'' ve prepaid all of the charges.Another reason, and this is less likely, but.
still something to bear in mind, is that a great deal of individuals who relocate to the United States.
from other countries, and for that reason attempt to develop credit in this country, attempt to do.
so utilizing a secured card. The problem is that the laws, the federal.
Since of the Patriot Act are very strict with respect to issuing credit, laws on the books.
to people who have actually simply moved to this country and aren'' t really people. That can also be one of the reasons why.
it'' s harder to open a protected card, however mostly the reason that protected card.
applications are rejected is because, although they'' re targeted to customers who are riskier.
customers, there are really some consumers who are simply such a hot potato, that even.
secured card companies truly wear'' t wan na work with them.If you have any other questions relating.
Have a great day. As found on YouTube – Creative Commons License.

License: Creative Commons