Friday, June 24, 2022

High Risk Credit Cards

A tiny micro economic indicator may be my personal financial situation vs. credit decision by lenders. Recently, and not at my request, Chase Bank who carries my Amazon credit card quadrupled my credit limit.

So what is the problem, WSF? Just this, I shouldn’t qualify.

In the many years spent retailing automobiles I became something of an expert on retail credit. The basis of loan decisions is the four Cs.

Character, as in your credit history. Things like loans paid off as agreed, bankruptcy, collections, delinquent child support, unpaid judgments, etc. Next is capacity. What is your debt load now against the income you have now. Third is capital as in savings, asserts such as homes, stock market shares, etc. In other words, are you worth suing? Four is collateral. After your down payment, if any, how much of the value of the item being financed is the lender carrying.

Another factor is your credit score which is determined by organizations like Equifax based on their evaluation of your credit history. The rating is from 0 to 800+.

In my case, none of my income can be attached. Social security can’t be touched. Unless it is a capital item like my recent computer purchase, little of what I publicly own is worth going after should I default on a credit card. My “character” coupled with a very high FICA score is my only one of the four Cs that justifies such a high credit line.

There is no rational reason for Chase to give me such a large credit limit. Should I max out the card then never pay, they are fucked. They will have next to zero recourse.

Perhaps because I pay the full balance off each month on all my cards that is their rational. If so, they are stupid.

So, WSF, what is your point. Just this. High risk credit seems to be the norm. As someone who lived through the dismal Carter/Reagan years and the 2008 subprime collapse, I hate seeing the same mistakes being made over and over. The rich didn’t get to be rich being stupid (unless they inherited). Why are they acting, on the surface, stupid? What is the payoff for them?

As always, YMMV.

On a related line of thought.

Along this line, why shouldn’t they play this game. You, the depositor in their bank is the one on the line. Check this out.

Can banks take your money to save themselves?

The Dodd-Frank Act. The law states that a U.S. bank may take its depositors' funds (i.e. your checking, savings, CD's, IRA & 401(k) accounts) and use those funds when necessary to keep itself, the bank, afloat.Mar 18, 2020

 Credit Unions, on the surface, are exempt but crushing regulatory requirements so raised operating costs many smaller credit unions have gone under.

Comments don't seem to be posting. Here are two.

3 hours ago
What a good post. I used to joke about a minimal Chase credit card debt, "What're they gonna do, take my CD collection?" (people still had CDs in those days...). Fast forward to now. No credit cards, no debt, a Credit Union savings account and a... safe. And I know it's not possible for many but I HATE being in any kind of debt. Cash on the nail, best way, imo.

Yep, few credit unions are left... sigh


Well Seasoned Fool said...

Low profile is best, IMO.

Same Dodd-Frank laid such administrative requirements small town and even regional banks were forced to merge/sellout/quit.

Wild, wild west said...

Proverbs 22:7 "The rich rule over the poor, and the borrower is slave to the lender."

Well Seasoned Fool said...