Are bad credit credit cards being restricted to existing customers?

12th February 2011

It can be intriguing for us to look towards statistics which show the deals restricted to existing customers only. Sometimes, preferential rates and offers which pose a higher risk to the lender are offered to customers which have borrowed with them before, as knowledge of their paying habits can result in a detailed assessment of whether they are suitable.

As the recession only began to get into full swing, eight credit cards were exclusively provided to existing customers of a loan company — and many of these had generous benefits which were incomparable to ones available to the public. Fast forwarding to today shows how there are more than 45 credit cards with this restriction, and the motivation for this tends to be related to the hesitancy many lenders feel. If you wanted to track this change in percent, you would discover that this is nearly a fivefold increase at 462%.

So, over these three years, when were the biggest leaps made? In short: the transformation from 2009 to 2010 was the most dramatic, as ‘existing customers only’ bad credit credit cards doubled in number from 22 to 45. Comparing this with the transformation between 2008 and 2009 is also insightful: a steep rise from eight of these credit cards to 22.

Analysts believe that lenders are doing this on purpose, trying to preserve the customers they already have instead of trying to cater to new ones. One expert from Defaqto said: “It is no longer unusual to see credit cards restricted to a provider's current account customers.” He proceeded to talk about how there would be preferential rates and a few further advantages, such as a longer period of time when there would be 0% interest on purchases. Many of the lenders wanted to tap into the mindset of ‘if good deals are available with my current lender, why should I move?’

However, experts are also warning that there should be no room for complacency in the current market. This is because bad credit ratings won’t necessarily mean that renewal for bad credit credit cards will be forthcoming. Such specialist cards are also ideal for those who aren’t existing customers with lenders due to a lack of experience, with some new customers finding it difficult to get a footing in the world of credit.

You want to explore the different options in the current market, but as these latest findings show, the commonplace advice to remember is this: if you want to get the most competitive and generous deals despite your bad credit, it might be worthwhile to look towards the lenders you currently use.

Posted in Credit cards