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. Fee Harvesting Card

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

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

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

    A card issued by a financial institution that is preloaded with ...
  6. Universal Default

    A practice whereby a credit card issuer increases a credit card ...
Related Articles
  1. Personal Finance

    Credit Cards For People With Bad Credit

    Yes, you can get a credit card and start repairing your credit history. But brace yourself for low credit limits, sky-high interest and staggering fees.
  2. Personal Finance

    3 New Types Of Credit Cards To Look For

    These three types of credit cards are becoming popular with customers looking to pay less fees and build up their credit scores.
  3. Personal Finance

    Terrible Credit Score? Try These Credit Cards

    When your credit is less than stellar you have fewer choices. But some are still better than others. Here's our read on which cards to get.
  4. Personal Finance

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  5. Investing

    Investing In Credit Card Companies

    This investment requires keeping an eye on consumer indexes and the overall health of the economy.
  6. 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.
  7. Personal Finance

    How Many Credit Cards Should You Have?

    National stats indicate most consumers have three or more cards - are you one of them?
  8. Personal Finance

    Credit Card or Cash?

    Credit cards are convenient to use, but not always the best choice. Here are 5 times you shouldn't pay with a credit card – and 5 times you should.
  9. 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. 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 >>
  2. 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 >>
Trading Center