About a year and a half ago, right after my divorce, I wanted a credit card (I didn’t have any at the time) to start rebuilding my credit. I did some searching around and found one of the companies that takes people with less-than-stellar credit, and they ended up approving a low-limit card for me ($300). This was fine for my needs – I just wanted a card to buy gas and other random small purchases with so I could help raise my credit score.
Some time ago, I had read on their site that one could request an increase in the credit limit after being with them 13 months, and I don’t have any late charges or anything with them, so today, I figured I’d inquire about a limit increase. I was hoping that I’d be able to get the card up to around $1,000 so that it could cover unforeseen emergencies like a significant car repair or the like. I clicked on the button on my account to apply for a credit increase, and this was the message I got:
My emphasis added.
So, let me get this straight: if you are generous enough to increase my limit by $700, I have to pay you $175 for the privilege? Despite being in my mid-30s, I am admittedly very ignorant about the ways of credit cards. But that just strikes me as being outrageous. Since I got the first card, I’ve gotten another credit card from Capital One, and they just randomly increased my limit one day. I neither asked nor was charged for the credit increase.
I’m just confused about why any credit card company would do this. I thought that the point from their perspective was to increase your limit to encourage you to overspend, thereby causing you to owe them a lot of money. Why would this bank actively discourage me from having a higher limit? Is this becoming common as banks try to find more ways to make profits? If so, it’s certainly going to backfire, in this case. Not only will I refuse to ever apply for a limit increase, I’m probably going to drop the card altogether.
Yes, that’s outrageous, even by today’s “I’ll put a fee on everything” standards. If your credit is so poor that this is the only card you can get, then I suggest not taking the credit increase. Otherwise, run far and fast, and close this thing before they add a “closing the account” fee.
ETA: Outrageous, yes, but a quick Binging shows that it’s not all that unusual for the “junk bond” level credit cards: i.e. the ones that specifically prey on folks with very poor credit.
My thoughts are that’s bullshit. I’m kind of like you. A few years ago I decided I was too old to have crappy credit, starting paying off old debts and got one of those shitty cards that lends to people whose credit needs a little loving. Then after years of being good, I applied at Capital One, was approved, and they keep randomly increasing my credit periodically. I don’t ask, they don’t send me any letters, they sure as hell don’t charge me any 25% fees; I go to pay my bill and see I have greater availability. Fair enough.
The reason CC companies like that charge these exorbitant fees is because they think they can. They probably figure you can’t get credit anywhere else, and so they have you by the short hairs. If your credit has improved enough that you’re being approved by other folks, tell First Premier and their $175 convenience charge to sod off.
I’ve never seen that, but I haven’t gotten any new cards recently. Making an utterly uninformed guess, it might be riskier for the “high risk” card companies to raise limits, so they have to subsidize it somehow.
If I were you, I’d probably use my newfound decent credit to get a “normal” credit card, keep both for a while, and eventually cancel the high risk one once my credit was established. Your old card is serving its purpose of helping build your credit card, so now you can look for one that will serve the purpose of providing a credit line in an emergency.
I’d never agree to it but I suspect that this company deals with individuals with very risky behavioral patterns. It does not suprise me they wan to do a little CYA.
I’m not implying you are a risk but that a company that is in the business of providing services to people with less-than-stellar credit likely gets stiffed a fair amount.
That company makes much of its income by charging fees other companies do not. Only those with poor credit find it acceptable. I suggest looking for a more reputable card issuer, and as long as your credit isn’t badly blemished, you shouldn’t have much trouble getting one. Maybe check with your bank for a recommendation or application.
Does the crappy card charge things like “inactive” fees, where if you don’t use it for X amount of time you get a fee? If not, I’d pay that sucked down to zero, maybe use it here and there for some minor purchase that gets immediately payed off - don’t close it right away, as that will ding your credit score a bit. Keep it open, but keep the balance low or zero.
It sounds like your credit card company targets people with bad or no credit. Many, although not all. of those are going to be people who are stupid about money. Therefore some proportion of those holding the credit card will accept the fee, put it on their card, and then start making minimum payments on the balance - the credit company’s dream situation.
It costs the company little or nothing to increase your limit. Therefore the interest they charge on the $175 is almost pure profit.
You didn’t fall for it. Okay, you are smarter than much of the rest of their customer base. But as you say -
so they aren’t making the kind of money off you that they would like, so if you drop the card (as you should) it is no skin off their back. Certainly not compared to the profit they will make off the dimwits who accept the 25%-of-limit “fee”.
The general rules I follow with credit cards are;
[ul][li]Get a “no annual fee” card. Not a “no annual fee for the first year! Sign Now!” card, a no annual fee card. [/li][li]Pay off the balance in full, every month. [/li][li]Treat any and all communications from the credit card company as what they are - “We want to get more of your money”. They don’t increase my credit limit because I am a good customer - they increase it because I am a bad customer, and they are hoping I will start carrying a balance so they can charge me interest. They aren’t trying to sell me credit insurance because they worry about me - they want to sell me insurance because they make a profit off it. Credit card debt is unsecured - there is not a lot they can do if I default, but if I have insurance…[/ul][/li]
The short answer is that they sent you a message saying, in essence, ‘let’s see if he’s as dumb as some of our customers’. It didn’t work. Oh well - maybe it will with the next guy.
As mentioned, I would not be surprised if they tried to charge you a fee for canceling the card. Check your agreement.
13 months with a clean record. I’d say you’ve probably started to build up your score (do you know what it is?). It’s probably time to get a new card. Maybe even something simple like Discover or Amex where you don’t have to wade through hundreds of different offers. Even a Best Buy card might be worth while. Whatever you get, I would use it regularly and request an increase (which, for the love of god, shouldn’t cost anything) every 6 months or so. Also, with something like Best Buy, they are always running financing specials, so if you ever need an appliance of something you simply can’t pay off in one month that’s usually the place to go since you’ll have the option of paying it off in 6/12/18/24 months with no interest.
Also check into a credit union in your area. They are generally member owned so that profits are re-invested to the benefit of the members. They still might keep you on a low credit limit, but they aren’t allowed to screw you so badly as the banks can.
For those that have asked or wondered, my credit is not completely in the toilet or anything. I’m in the upper third of the 600s. A recent short-sale dinging is probably going to weigh me down for a couple of years, at least, but in the meanwhile, I can keep paying everything on time and try to find other ways to build.
On that topic, there seems to be universal agreement that First Premiere sucks, and I’m not about to argue with you on that. How likely is it to hurt my credit by closing that account, though, since I’ve had it open over a year at this point? I’ve always made sure that the balance is zeroed out every 15 days, and I don’t even know that I’ve used it in the last three months at all, so it’s not like I’d miss having it in my wallet. But since it isn’t hurting me financially to keep it open, am I going to do unnecessary damage by closing it out?
Also, since others suggested getting other cards (AMEX, Discover, Best Buy, Sears), how much will applying for those cards potentially drag down my current credit? How much are those businesses willing to extend credit in our current market to someone in my credit range? And how much will opening another line of credit benefit me from a credit score standpoint in the short- and long-term?
I realize I’m broadening the topic of the thread, but…it’s MY thread, dammit.
Applying for many credit cards at once sends a flag to credit bureaus. Back off on this.
Voluntarily closing an account that you have never used or have no black marks against, fine.
Keeping the same account open, as long as you don’t have to pay any fees, fine. If fees are imposed, it would be a good idea to close it soon if you have used it for a good purpose (use them, don’t let them use you!).
Modest number of cards, modest credit ranges, all look good on reports. Anything that stands out, not so good. Take it easy and gradual and you should be OK.
Then, stick it to The Man!
Disclaimer: I am not a financial advisor, and I am not your financial advisor. Consult a professional for professional advice.
I wouldn’t close it yet. The age of your oldest account (that’s still open) is relevant.
Don’t go and apply everywhere and build up a ton of hard inquiries, but unless you’re applying for any other kind of credit right now, go ahead and apply at a few places. Store credit cards (especially those that don’t have a Visa or Mastercard affiliation) will be far easier to acquire than, say, a Discover card. Of course, picking something that you like and will want to keep is probably a good idea. For example, back a long time ago when I was building my credit, I used a Target store card (not a Target Visa):
They kept upping my limit and eventually offered me a Target Visa instead, which I still have.
There’s no reason to close the old card for now unless you’re paying fees just to maintain it. In which case, I’d wait until I had a new card for a few months at least.
I have a credit card that I have had for years, but stopped using regularly (I have another one that is my primary credit card when I want or need one). I occasionally pull out the old one, use it, then pay off the balance in full so that they don’t feel tempted to close the account on me.
