Focus On Profits Leads to More Good Credit Applicant Rejections than Ever Before
Wednesday, 24 July 2013
Credit card companies are turning down more applicants with good credit scores than ever before as a result of algorithms designed to maximise profits, ruling individuals who are credit worthy as being bad for business, damaging their credit profiles in the process.
The process of vetting such individuals is designed to filter out customers that will prove to be unprofitable, like those who clear their balances every month and generally keep their accounts in good order.
Research by the website Totally Money concluded that as many as 70% of good credit applicants were being turned down for credit cards, forcing these good credit applicants to apply for cards that offered far worse deals than those which they should be able to obtain as a result of the low credit risk they pose to lenders or to opt for credit card alternatives, such as prepaid cards.
Credit card companies are also not very forthcoming with their reasons for declining applicants, leaving many of them completely in the dark as to why their application has been turned down. This gives applicants very little clarity and next to no possibility of addressing the reasons for their decline, as the yes or no decision is now almost always taken by a computer.
The cost cutting exercise of replacing staff with computers to streamline the credit card application process has been effective in many respects, but in others it’s lack of flexibility has proved detrimental, as applicants who would be suitable for a card are declined as they are not given the opportunity to provide additional information that potentially overturn the lenders original decision.
One particular type of card that has been increasingly difficult to apply for if you have a good credit profile are reward cards that give customers cashback, points or airmiles when they use it, or additional benefits such as complimentary travel insurance, as these are both some of the more popular cards with good credit borrowers and the least profitable for lenders.
So what does this mean for the credit card industry? Well, one option for those affected is to turn to prepaid cards as an alternative.
The increased use and growth of prepaid cards within the UK has seen many traditional credit card customers leaving their traditional cards behind, opting for prepaid cards their place, for a multitude of different reasons, from both bad and good credit customers.
The rise of prepaid has also sparked the emergence of reward cards such as our own, which comes with Priority Pass membership and travel insurance completely free of charge, giving consumers for whom added benefits and value are a key factor when selecting credit cards a viable, worthwhile alternative.
To find out more about the T24 Black Card, its benefits, and how you can apply for one today, click here.