Subprime Credit Card

AAA

DEFINITION of 'Subprime Credit Card'

A type of credit card issued to people with substandard credit scores or limited credit histories. These cards will typically carry much higher interest rates than credit cards granted to prime borrowers; they also come with extra fees and lower credit limits.

Subprime credit cards are issued by both major issuers and smaller financial institutions that focus only on subprime lending.

INVESTOPEDIA EXPLAINS 'Subprime Credit Card'

The subprime credit card industry has seen some controversy as accusations of predatory lending practices have been documented. Predatory lending can lead to a borrower not knowing the full extent of the fees they are paying; some subprime cards carry covenants that can cause the interest rate to spike if a payment is late or the card holder exceeds his or her limit.

Interest rates on subprime credit cards can run as high as 30% and should be used with great caution by individuals seeking a source of credit.

RELATED TERMS
  1. Prepaid Credit Card

    A card issued by a financial institution that is preloaded with ...
  2. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
  3. Risk

    The chance that an investment's actual return will be different ...
  4. Prime

    A classification of borrowers, rates or holdings in the lending ...
  5. Subprime

    A classification of borrowers with a tarnished or limited credit ...
  6. Subprime Lender

    A type of lender that specializes in lending to borrowers with ...
Related Articles
  1. How To Dispute A Credit Card Charge
    Credit & Loans

    How To Dispute A Credit Card Charge

  2. Credit, Debit And Charge: Sizing Up ...
    Credit & Loans

    Credit, Debit And Charge: Sizing Up ...

  3. Understanding Credit Card Interest
    Retirement

    Understanding Credit Card Interest

  4. Digging Out Of Personal Debt
    Credit & Loans

    Digging Out Of Personal Debt

comments powered by Disqus
Hot Definitions
  1. Correlation

    In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used ...
  2. Letter Of Credit

    A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. ...
  3. Due Diligence - DD

    1. An investigation or audit of a potential investment. Due diligence serves to confirm all material facts in regards to ...
  4. Certificate Of Deposit - CD

    A savings certificate entitling the bearer to receive interest. A CD bears a maturity date, a specified fixed interest rate ...
  5. Days Sales Of Inventory - DSI

    A financial measure of a company's performance that gives investors an idea of how long it takes a company to turn its inventory ...
  6. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
Trading Center