Credit Card Approval Becoming Increasingly More Difficult to Get

If you have applied for a credit card recently then you more than likely have first-hand knowledge of how incredibly difficult it has become to get approval. In many cases banks are now requiring proof of income through bank statements before approving a credit card application. And even when applications are approved, the credit limits being offered are much smaller than they have been in the past.

And that, in a nutshell, is exactly the way it’s going to be… for a while anyway. Historically banks and credit card companies tighten their credit standards during economic slowdowns such as the one we have been experiencing for the past two years. Typically when things improve economically they will loosen their standards and be more willing to issue credit cards.

After all, credit cards produce huge profits for financial institutions. But things are different this time around. The default rate on credit cards is at a record level and it is hurting the credit card issuers in a very serious way.

Couple this along with the fact that the new credit card legislation will prohibit issuers from raising interest rates on cardholders they feel are at higher risk and it is not at all difficult to see why getting approved for a credit card is now, and will be in the future, quite difficult.

Do you remember just a few short years ago when you could pick up a newspaper and read a story about a young child getting approved for a credit card almost on a daily basis? I believe I recall a story about a man putting information about his dog down on a credit card application just to see if it would be approved… and it was.

Well it seems as though those times are over. Credit card companies always react to tough times by tightening their standards. But they also just as quickly loosen those standards when the economy improves. One would think that this would be the case now as well except for the 800 pound girl in the room… credit card reform legislation.

The Credit Card Act of 2009 will greatly inhibit the ability of credit card issuers to arbitrarily raise interest rates on their customers. The result of that of course will be shrinking profits. The new laws will also make it more difficult for the credit card companies to impose fees on account holders.

Of course, none of us knows what the future will bring and when the economy does improve, and it will, I would be willing to bet that we will once again see credit loosen up.

You see, while profits in the credit card industry may be curtailed at this time, and they most certainly are, it will continue to be a multi-billion dollar cash cow industry for the financial institutions that know how to manage them properly.

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Related Information:

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