First Premier Rescinds Offers

25 May, 2010

There are so many credit card offers available today. Regardless of credit history there are cards that are designed to fit every credit score. Each card offer is unique in its target market, perks, benefits and rates. People with a good credit history have the advantage of choosing from a wide range of cards with a low APR, few fees and other nice advantages.

Those with poor credit may not get the same options but there are offers out there that that are targeted for people with bad or less than optimal credit history. First Premier is well known for their selection of card offers for those with less than optimal credit. First Premier is one of the first credit card companies who have reported that they will be removing two of their well known credit cards geared towards individuals with poor credit. The credit card offers that have always been so readily available may become less attainable with the implementation of the credit card reform act.

Before the Credit Card Act
Prior to the implementation of the credit card act, credit card offers lined mailboxes. The credit card companies mass mailed offers with a mission to lure in business by promising a great credit card with unique perks and low fees. When the economy was healthier the credit card industry was more lenient in granting credit cards to individuals with less than perfect credit scores so the benefit of mass mailings would yield greater profits for the industry. Credit card companies had the freedom to approve credit card applications for people with bad credit by limiting the risks associated with granting these cards.

Before the credit card act was implemented the way that risk was controlled was through fees. Credit card companies limit their own risk by charging fees, setting strict spending limits. They had the freedom to charge fees and change them as they saw fit. This freedom balanced the risk of issuing a card to people with poor credit. Businesses and individuals tend to be less open to taking risks than in an economy that is uncertain.

After the Credit Card Act
The credit card act has caused significant changes to the credit card game. Lenders are now restricted from raising rates without reason or notice to the cardholders. The rules and regulations for borrowers and lenders have tightened up. The change in the economy has made credit card companies a bit more selective in their approval processes. Not everyone today is guaranteed to be approved for a card even if they receive a free offer in the mail.

The credit card offers that once lined your mailbox each week are becoming fewer and fewer. Lending to those with bad credit is becoming a bigger risk. Credit card companies no longer have the freedom to recoup losses through increased fees. This makes lending riskier than it has been in the past, especially to those with poor credit.
Reports indicate that despite the implementation of the credit card reform act, 27% of lenders surveyed reported raising credit card interest rates in the first quarter of 2010. None reported to have cut rates on existing cards. This is interesting given that the credit card act was instituted to prevent the chronic rate increases that were adding to consumer debt. The really interesting part is that the law prevents companies from raising rates of existing cards, but not on new offers.

First Premier Removes the Risk
First Premier is one of the credit card companies known to market cards to consumers with poor credit. First Premier has announced their recent decision to remove the First Premier Bank Classic and Aventium cards from their list of available offers. First Premier reports that as a general practice, they review and evaluate their card offers and make changes as necessary. They did not commit to bringing back the First Premier Bank Classic or the Aventium card nor did they indicate that they would be replacing these cards with other comparable offers.

Although the credit card act restricts banks from raising rates of existing cardholders there is nothing in the law that prevents them from raising rates for new offers. The credit card industry in an effort to restore their profits and recoup fees that they are sure to loose with these new regulations are getting creative to ensure their profits are protected. Removing offers that do not offer financial gain and replacing them with other new offers may just another way around the guidelines of the credit card act.

It makes sense that First Premier would pull the old offers targeting towards those with poor credit to decrease their potential risks in anticipating for the continuing additions to the credit card reform act. Issuing credit cards to people with bad credit holds the most risk and the least payoff for the credit card industry. Given the low spending limits and the potential for the company to take a loss if the borrower defaults; cutting cards for people with poor credit histories makes sense.

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