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.

BREAKING DOWN '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. Credit Card

    A card issued by a financial company giving the holder an option ...
  2. Secured Credit Card

    A type of credit card that is backed by a savings account used ...
  3. Fee Harvesting Card

    Credit cards targeted at consumers with poor credit scores that ...
  4. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  5. Business Credit Card

    A credit card intended for use by a business rather than for ...
  6. Prepaid Credit Card

    A card issued by a financial institution that is preloaded with ...
Related Articles
  1. Personal Finance

    Understanding Credit Cards

    Credit cards are a type of unsecured personal loan between the credit card issuer and the credit card holder.
  2. Personal Finance

    How To Get A Credit Card Despite Bad Credit

    Prepaid credit cards and secured credit cards are both excellent options for getting a credit card despite having a poor credit rating.
  3. Investing

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  4. Personal Finance

    Best Credit Cards For People With Poor Credit Scores

    There are still ways you can build credit with a credit card, even if you have bad credit.
  5. Personal Finance

    Are U.S. Banks Becoming Aggressive on Lending Again?

    Discover why banks are increasing their credit portfolios to include more credit cards and how this may impact your ability to borrow in the future.
  6. Personal Finance

    The Pros And Cons Of Small Business Credit Cards

    Business owners have many financial tools at their disposal. Should a credit card be one of them?
  7. Personal Finance

    How Many Credit Cards Should You Carry?

    If you have ever wondered whether you should carry one, two or more cards, read on and we'll tell you.
  8. Personal Finance

    Why Too Many Credit Cards Can Hurt Your Credit Score

    Find out why having too many credit card accounts can adversely impact your credit score if the cards are not managed properly.
  9. Personal Finance

    How Many Credit Cards Should You Have?

    Having several credit cards provides many benefits. Here are a few factors to consider when you’re deciding how many credit cards you need.
  10. Personal Finance

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
RELATED FAQS
  1. How do secured credit cards help me build my credit score?

    Find out how secured credit cards function and why they can be very useful for those looking to build or rebuild their credit ... Read Answer >>
  2. Where are secured credit cards accepted?

    Repair a damaged credit history or establish one by opening a secured credit card account with a collateral deposit into ... Read Answer >>
  3. What are some common models that practitioners use in quantitative analysis of equity ...

    Understand which aspects of a credit card agreement make accepting a new credit card offer a good deal or one that should ... Read Answer >>
  4. How can I avoid paying unnecessary credit card fees?

    Examine different strategies for reducing fees on credit cards. Learn about the Consumer Financial Protection Bureau and ... Read Answer >>
  5. How do I get a higher limit on my credit cards?

    Understand how credit limits work with major credit card companies and things you can do to get a higher limit on your credit ... Read Answer >>
  6. Can a Best Buy credit card help you build credit?

    Learn about how using a Best Buy credit card responsibly can lead to a higher credit score and lower interest rates on mortgages ... Read Answer >>
Trading Center