The truth is that there is not much credit card risk, but there is a big risk of identity theft.
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Since the deposit acts as collateral, you can get the credit card at low risk to both you and your lender, so approval is likely to be easy, regardless of how bad your credit is.
However, the prospect of identify theft and using other credit card numbers remains a risk.
Issuers seem to have maintained the stringent credit card approval rates to minimize their risk.
Fair Isaac Corp. evaluates a different kind of risk: the risk that a credit card or mortgage borrower will stiff the lender.
For example, if you are an e-commerce company doing online transactions and storing data such as credit card information, you are considered high risk for data breach and thus subject to higher premiums.
Even if consumers feel confident that using their credit card online will not put their solvency at risk, they still may feel uneasy.
One way to avoid that risk is to set up your credit card on autopay to withdraw the balance from your checking account each month.
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It was a risk, but she took out a credit card loan and paid for it.
Competition among issuers is extremely high as credit card companies try to attract the consumers with the lowest risk: those with high credit scores.
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Ms. CHU: Just like with mortgages, because banks have sold off the credit card debt, they've shifted some of the risk off their books.
Turns out that the Primary Fund, like many other money market funds, made significant investments in asset-backed commercial paper (ABCP), which offered juicy yields, but did so because they were backed by things like mortgages, auto loans, credit card receivables and other risky assets that, despite their risk, came with investment-grade ratings.
In this world of increasing immediacy and unpredictability, do financial institutions have to live with the problem of isolated data warehouses, or is there a new possibility they can integrate those massive data sets and apply technologies like business analytics to uncover patterns and make correlations that might reveal, say, at-risk mortgages, based on changes in individuals' credit card use?
"There's not a huge risk for the consumer except to maybe have to cancel a credit card, " he said.
"The lease residual-value risk in general remains Ford Motor Credit's biggest asset-quality wild card, " says Glenn Reynolds of the credit analysis firm CreditSights.
Lastly, the IRS advises that if you think you may be at risk for identity theft due to a lost or stolen purse or wallet, questionable credit card activity, or unexpected bad credit report, contact the IRS Identity Protection Specialized Unit toll-free at 1-800-908-4490.
Credit card issuers closed risky accounts, cut credit limits on millions of accounts, and tightened lending standards to cut their risk of defaults and late payments.
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Credit card balances dropped because cardholders reduced their use of credit cards at the same time as issuers reduced their own lending risk, slashed credit limits on millions of existing accounts and closed riskier accounts.
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And they are likely to continue through the holiday season, when consumers tend to make more credit- and debit-card purchases and sometimes lose track of their spending, says Doug Johnson, vice president of risk management policy at the trade group.
Thus, for those who redeem rewards frequently, the free flights, complimentary hotel stays and fringe benefits (preferred status, VIP access, etc.) outweigh the risk of devaluation and make airline or hotel credit cards hard to beat by any other type of rewards card.
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