The November 6, 2006 issue of Business Week magazine features an article about Capital One Financial’s credit card and sub-prime lending practices. The article cites several examples of cardholders who were able to get as many as six Capital One cards at one time and, all the while, continued to receive even more direct mail offers for more card offers from Capital One. Typically, the cards offered are for much smaller credit limits than normal ($300 for example) and as a result of the much smaller credit limits, many of these cardholders end up being socked with heavy late fees, over-limit fees, and penalty interest rate charges, making these cards a very expensive proposition for some cardholders.
It works a little something like this … Capital One offers a card with a small credit limit to “sub-prime” borrowers who might be less sophisticated in their borrowing and credit practices than most borrowers. Sub-prime borrowers typically have a checkered credit history and have fewer options for borrowing than individuals who have a cleaner credit history. So typically, this type of cardholder will jump at the opportunity to acquire a credit card like this.
Here’s where it gets really interesting. Instead of offering a single card with a traditionally higher limit, Capital One will offer these cards to sub-prime borrowers that are much easier to acquire than traditional cards, but with much smaller credit limits attached. Capital One is betting that a cardholders with a small credit limit is much more likely to exceed their limit, and as a result, are much more likely to generate over-limit fees.
Even worse, Capital One encourages the use of multiple cards by continuing to offer additional card products on top of existing cards. Trying to manage several credit cards at once increases the likelihood that you’ll not only go over the limit to generate fees, but you’re also more than likely to miss a payment, which in turn generates even more fee income for Capital One in the form of late payment fees, adding insult to injury. Over-limit and late payment fees can add up very, very quickly, particularly for those with multiple cards.
If you are diligent about your ability to stay within your credit limit and make repayments consistently on time, you shouldn’t worry. As always, buyer beware but you might want to be extra careful with these card products.
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{ 4 comments… read them below or add one }
Capital One is the worst card company ,,,, try reaching a person to speak with that can answer a question. They are all about walking the fine line of being a 'Legal Loan Shark'. They need to be investigated.
They are the worst……and I speak for a lot of people….
I too had a sub-prime Capitol One credit card and its true….this was many years and I am still disputing the over the limit, late fees that they started to pile on. I had not only paid on time but often paid more than was due per the statement and then one Christmas holiday I mailed my payment just as I always had but due to holiday mail load it arrived one day late which Capitol One then socked me with a $45.00 late fee. Because I had been a customer in good standing with them I asked that they remove the late fee just that once as it happened during holiday season when mail sometimes gets bogged down. The rep I spoke with was so rude it was unbelievable, he checked and stated he could see I was a good customer but told me I would have to pay the fee and then request in writing that the fee be removed. I told him no, I had worked for a credit card company and I knew he had the authority to remove it as a one time courtesy, he refused to let me speak with a manager. Well I paid my balance for the purchases I made which was a little over $300.00 but wrote to say I would not pay the late fees. Also, because of the late fee I was then over the limit (limit was $300.00). So now it is ten years later and they still sell my old account to a new collection agency every year, the fees that have acrued on top of fees now total over $6,000.00. None of which is an actual balance owed, just their fees that have compounded interest while still accruing and according to the collection agency they will still accrue the interest and compound the fees until its paid. So for a $300 limit they are charging over $6,000 in fees….way to go Capitol One…I don't care what type of Capitol One you have, no one I know has had a good experience with them and no one I know would ever recommend using their card to anyone…what's in your wallet…not Capitol One!!!!
Wow. I agree whole heartedly with the Maria and Sam.
I have/had a similar situation like Sams – with a 300 dollar limit. Which after years, somehow is now spiraled to over 900 dollars – not including all the other fees and interest that will be tacked onto the balance – that is when I fight them in court and dispute the legitimacy of the claim. i wouldn't be surprised if they want $2k from me because of all this.
What had happened, was I originally got a solicitation from India where they cold called me and got me to sign me up for the card. Between the English being so bad, me no having anything in writing, I tookhad to take their word. Then I recieved the card and proceeded to use it. I eventually tapped out the 300 dollars over the course of serveral months. then 2007 came along, and the economy crashed and I lost my jobs, went through chronic unemployment and spent 4 years, hand to mouth, trying to find work and living from city to city. Ultimately, I was a creditors skip tracers night mare. They couldn't find me for these years.
So fast forwarding to this year, after I eventually got more stable, I found work and had moved a couple times. And much to my surprise, I just got served this morning, and by someone (my girlfriend) foolishly who was at my house who answered the door (AFTER me explicitly telling her not to accept any inquiries from ANYONE who's not dressed in a uniform – whether this is my house or not or If I was home….)
– of course – It wasnt me falling for the *knock knock* "delivery! – are you Mr._____?" (then you get your court summons handed to you. )
SO now, I have to fight them in court and challenge the legitimacy of the account and make them prove whether they have proof. Me ignoring the summons is the WORST thing I can do. I spent hours today researching this topic and have a good idea what it going to have to happen. I know this, that if I show up, I will have a fair chance at overturning this case, because it might be somewhere around only a thousand owed -(hopefully not too much more) and I will challenge the hell out of all this and make them spend more time and money going through the hassles. I've heard if you stall them and tie them up, odds are you can get them to not pursue your case. I was told, that these collection law firms have dozens upon hundreds of these cases, and they really bank on the people not showing up to court – which is the name of the game for them. SO I'm going to do everything in the next 45 days to respond to these vultures, and make them work, and work some more, and then via communication, I'm going to make it look as if I'm not interested, and then I will show up at 8:15 in the mornning, armed with my vocabulary in line of what I am going to demand from them, and challenge everything possible. I'm going to drag out the time in the court as long as possible so that the lawyers will have no interest in making a few hundred extra bucks – it wont be worth their time – this is what I'm hoping!!
There is a reason Cap 1 uses barbarians and vikings on their commercials, its a mirror image of who's working at that company!
Wish me luck, who ever reads this, and I will be sure to follow up later and provide updates.
In summary, about a year ago we moved to a Capitol One credit card from our other company of which we had been with for several years (and had a VERY high line of credit). Thinking Capitol One was interested in a long term business relationship we took the plunge to change cards to be with them. As it would be, we are finding they are not at all interested in speaking to helping any of their customers. Even those in good standing. With nearly perfect credit scores and a history, though brief, with Capitol One of managing our cards impeccably we still don’t rate important to them. We asked for a credit limit increase and were turned down. Not only turned down, but found that there are no people interested in helping expedite the process to increase our limit AND we discovered there aren’t any professionals in the Capitol One business who either have a telephone or the desire to speak with a customer. We were only allowed to speak with an Account Manager. That person was “sorry they could not help” and thus useless. Further, we uncovered per this Manager that Capitol One does not having ANY means for us [customers] to communicate our displeasure to Capitol One other than a PO box for “general communications” or the message board which falls on deaf ears to a standard customer service representative. It is grossly apparent Capitol One is not interested in customers, relationships or long term business.
Anyone considering this company for anything should seriously reconsider. We are!
PS I’m blasting this out anywhere I can in the hopes it reaches people it can help.