Credit Card Company Not Always Operated By A Bank
During the early days of banking, the choice of a credit card company was severely limited, and most cards were issued by banks or established institutions. Today, it is easy to find a credit card company that is backed by investors and not necessarily connected to a specific bank, other than the one that backs the investors. A credit card has one major difference from a charge card, in that with a charge card the entire balance comes due every month and with a credit card, the available balance is influenced by a revolving limit and is good for the difference between the current balance and the credit limit on the card.
When the need for credit was perceived to be high, beyond large purchases such as homes and vehicles, banks were the primary credit card company most consumers turned to for issuing them a card based on their credit standing. Many consumers were effectively shut out of the credit card availability due to less than perfect credit histories or lack of a credit history and some could not meet the minimum income requirement of the issuing banks.
The take advantage of a large segment of consumers, those who could not qualify for a standard bank-issued card, institutions were formed as a credit card company to offer high interest, high charge companies for those that could not qualify for a traditional credit card.
Justification Needed For High Credit Card Costs
Consumers with damaged credit reports can sign up with a credit card company for a card that puts them back into the mainstream credit market. These cards, backed mostly by investors, are typically more expensive to obtain as well as maintain with high up-front costs, higher interest rates and typically high penalty costs for late payments or for going over their credit limit.
Some critics claim the credit card company that tacks on all the extra charges is taking advantage of those who usually can afford them the least. Meanwhile the companies defend their action reporting that by issuing a card to someone with a bad credit history is a gamble that will cost the credit card company and their investors dearly if they have to go after a person who defaults on the obligation.
In many instances, the credit card company will initially write off the loans as a bad idea and other companies, not owned or operated by the credit card company will buy the bad debts and attempt to effect collection.
