Quote:
Originally posted by taxwonk
Before anyone other than Club gets a hernia worrying themselves over the poor credit card issuers who are losing money on bankrupt borrowers, let's inderstand one simple fact. Most of these issuers have already earned a huge profit on these borrowers; profit that dwarves the relatively small amount of the average writeoff.
Your average subprime credit card offer looks a lot like this:
The borower gets a "chance to rebuild their credit."
The credit limit on the account is around $250-500.
The card issuer charges an annual fee of about $40-50.
There is a $25-30 charge on each of the following: overlimits; late payments; bounced checks.
The issuer applies payments to these fees and interest before the first dollar of principal is paid.
There is a reason that the subprime segment of the market is the fastest growing and most lucrative segment, even after bankruptcies are factored in.
These assholes are even worse than insurance companies.
|
While I'm sure that's true, there is good reason that PVN traded down below $5.00 in the last few years. And that NXCD isn't publicly traded anymore. And that KRB hasn't had a steady ride to the moon. Nor COF. And in the subprime car business, someone once convinced the market that ACF was going out of business.
If nothing else, it taught me to buy subprimes when the U.S. economy is looking weak. WHen it invariably comes back, these companies do make money hand over fist. But when they start taking hits (e.g., late 2001-2003), the stock market convinces itself that they are all insolvent and not worth a dime. Funny that.
Threaded Mode