High Limit Credit Cards for Bad Credit
The concept of credit cards with high credit limits originated at a time when the economy was in fairly good shape. There was no credit crisis, no fear of hyperinflation and the interest rates were low enough to encourage borrowing. Admittedly, people with poor credit scores could not hope to avail high limit credit cards that offered credit limits of up to $100,000. Nevertheless, credit limits on unsecured credit cards for bad credit consumers were much higher than the current credit limits on the same. The decline in the availability of high limit credit cards for bad credit can be attributed to the following factors.
Factors Responsible for the Clamp on High Limit Credit Cards
High limit credit cards for people with bad credit are sure to become redundant on account of the following reasons. In fact, the factors, mentioned below, will have a negative impact on the credit limit for all credit cards.
Increasing Unemployment
In January 2009, 20 percent of the banks reduced the credit limit on the existing credit cards for prime borrowers while 60 percent adjusted credit lines to reflect the perceived risk of lending to consumers with poor credit. In general, all consumers with credit scores less than 720 have witnessed reduced credit limits. In fact, banks have gone the extra mile and have voided cards that have been inactive for a long time. The unemployment rate is at 9.8 percent and is expected to peak in the second quarter of 2010. Hence, it's only natural that credit card companies are wary of increasing or maintaining the credit limits even for people with perfect credit. In this scenario, (bad credit) credit cards with high limits are highly unlikely.
The Credit Cardholder's Bill of Rights
While discussing the potential credit limit, it is imperative to mention the Credit Cardholder's Bill of Rights that was signed onto law by the Obama administration on May 22, 2009. This act is meant to protect consumers from a number of unfair practices adopted by credit card companies. The crux of the new credit card law may be captured in the following paragraph.
Credit card companies are no longer allowed to use the double billing cycle method of calculating finance charges. All promotional offers have to be retained at least for the first 6 months. Interest rate hikes on pre-existing balances have also been vetoed and the card issuer is expected to give a 45-day advance notice to the consumer before increasing interest rates. However, no interest rate hikes are allowed within the first year of issuing the card. The cardholder also has the right to opt-out of interest rate hikes. Unless the consumer specifically desires to opt-in, the card issuer cannot process over-the-limit transactions. Moreover, over-the-limit fee can be charged only once per billing cycle and per (over the limit) transaction. However, the consumer cannot be charged an over-the-limit fee if he/she faces an unsuspecting hold on the credit card. The law also ensures that all payments above the minimum have to be applied initially to the highest-interest rate balance. In case consumers are unable to make the minimum payment within 30 days of the due date, the card issuer has the right to increase interest rates.
The law has resulted in reduced credit limits, increased annual fee and set-up fee and a decline in 0% introductory APR cards even for consumers with perfect credit. Hence, the feasibility of high credit limits for people with bad credit is highly questionable.
It's clear from the above discussion that, high limit credit cards for bad credit consumers are highly unlikely given the lingering uncertainty in the economy and the stringent control that is being exercised on credit card issuers.
