Subprime Credit Card


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.

  1. Prepaid Credit Card

    A card issued by a financial institution that is preloaded with ...
  2. Credit Card

    A card issued by a financial company giving the holder an option ...
  3. Consumer Credit

    A debt that someone incurs for the purpose of purchasing a good ...
  4. Risk

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

    A classification of borrowers, rates or holdings in the lending ...
  6. Open-End Credit

    A pre-approved loan between a financial institution and borrower ...
Related Articles
  1. Credit & Loans

    How To Dispute A Credit Card Charge

    Follow these steps if you've been ripped off or spot an error on your bill.
  2. Credit & Loans

    Credit, Debit And Charge: Sizing Up The Cards In Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  3. Retirement

    Understanding Credit Card Interest

    Paying these rates can impact your disposable income and your investment returns.
  4. Credit & Loans

    Digging Out Of Personal Debt

    Find out why good intentions can put consumers in an even bigger hole than before.
  5. Investing Basics

    Subprime Lending: Helping Hand Or Underhanded?

    These loans can spell disaster for borrowers, but that doesn't mean they should be condemned.
  6. Options & Futures

    Cut Credit Card Bills By Negotiating A Lower APR

    Reducing the rate charged on your credit card balance is the first step to getting out of debt.
  7. Investing Basics

    5 Tips For Diversifying Your Portfolio

    A diversified portfolio will protect you in a tough market. Get some solid tips here!
  8. Entrepreneurship

    Identifying And Managing Business Risks

    There are a lot of risks associated with running a business, but there are an equal number of ways to prepare for and manage them.
  9. Forex Education

    Explaining Uncovered Interest Rate Parity

    Uncovered interest rate parity is when the difference in interest rates between two nations is equal to the expected change in exchange rates.
  10. Fundamental Analysis

    Using Decision Trees In Finance

    A decision tree provides a comprehensive framework to review the alternative scenarios and consequences a decision may lead to.
  1. Does the Walmart credit card have an annual fee?

    The Walmart credit card does not charge annual fees to its cardholders. It does, however, have other fees associated with ... Read Full Answer >>
  2. How do NetSpend cards work?

    NetSpend prepaid MasterCard and Visa cards are popular prepaid debit cards requiring no minimum balance and no credit check. ... Read Full Answer >>
  3. Can the Best Buy credit card be used anywhere?

    The Best Buy credit card can only be used in Best Buy stores and when making purchases online through the Best Buy website. ... Read Full Answer >>
  4. How does the Best Buy credit card work?

    Best Buy has two credit cards available. One can only be used through Best Buy and its affiliates, and the other can be used ... Read Full Answer >>
  5. Do pharmacies take CareCredit?

    The CareCredit card is accepted only at select Rite Aid pharmacy stores in the states of New York, Pennsylvania and Maryland. ... Read Full Answer >>
  6. Can a Best Buy credit card help you build credit?

    A Best Buy credit card can be used to help improve your credit score and credit history as long as you use the card responsibly. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  2. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  3. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  4. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
  5. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the legal sense may also refer to an exemption from liability ...
  6. Discount Bond

    A bond that is issued for less than its par (or face) value, or a bond currently trading for less than its par value in the ...
Trading Center