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  1. #1

    Default Capital One Bank

    Capital One's Small Credit Limit Trap

    by bhazelton on November 4, 2006 Business Week Magazine

    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.

    How can this happen? Well, it’s really quite simple according to many credit and debt counseling experts in the field. Business Week outlines Capital One’s practice of offering multiple credit cards with small credit limits is done in an effort to maximize the income they receive from late fees instead of counting on interest or finance charges as the primary source of income on these products.

    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.

    Many of our FG readers have wondered about Capital One's small credit limits that generally don't get very large. This was a story printed in the November 6, 2006 Business Week Magazine that answers the question. As Capital One grows and absorbs more retail accounts where will we be...?

    
    Last edited by Wanderer; July 9th, 2011 at 05:11 PM. Reason: Typos / removed irrelevant links

  2. #2

    Default Re: Capital One Bank

    Capital One back when that was written was also known not to report credit limits to the credit bureaus (old postings of complaints on forums can be found) and when they did I believed it affected a person's business card with them too.
    Last edited by eugene66; July 8th, 2011 at 11:15 PM.

  3. #3

    Default Re: Capital One Bank

    Quote Originally Posted by Wanderer View Post
    Capital One's Small Credit Limit Trap

    by bhazelton on November 4, 2006 Business Week Magazine
    ...

    Many of our FG readers have wondered about Capital One's small credit limits that generally don't get very large. This was a story printed in the November 6, 2006 Business Week Magazine that answers the question. As Capital One grows and absorbs more retail accounts where will we be...?

    
    Thanks for a great article you found. I was just watching the movie Maxed Out last night. It's available on netflix instantly. It describes some of the same things of this article. I know where I'll be ! Without a Capital One card I had one of there cards over ten years ago. Credit limit was $5000 however the Apr was 18.9 %. Ahh yes to be young and carefree! LOL ! Needless to say they made a lot of money from me. I think their motto should be "What's Left In Your Wallet Take It Out And Send It To Us" not "What's In Your Wallet" LOL !
    I decided to be proactive and close my HSBC GM card . I don't ever want a Capital One card again !
    Last edited by Finance Globe; July 8th, 2011 at 10:59 PM. Reason: Shortened quote

  4. #4

    Default Re: Capital One Bank

    I have 2 accounts with them and they hate me. I never go over my limit or pay late. I have even gotten them to reverse the annual fee on both cards for this year, 1 was done like 4 months after the fee hit. All there practices have resulted in an additional total credit to my account of $110 and them sending me my card express mail to both China and the US. This wall due to their bad practices. I would have been happy to merely have had credit limit increases on a routine basis to insure my score will increase. Soon I will have to deal with them for my Household Bank card, which has no annual fee. It is amazing how they can't actually identify which customers they truly need to treat nice and which who are actually still faltering from their own bad habits. I have corrected my mistakes and truly don't need credit cards, except to build my score to buy a home. They are not helping with this and their low limit as much as a higher limit would. Think about it, if they make you reapply for a card to get a good limit, that lowers your score. If you close your account afterward or before, that lowers your score. It doesn't matter which way they go about it, it is for a specific purpose, to keep their subprime customers fueling their income. Multiple accounts with low limits, limits your credit score and advances their income in case of a problem. I have taken to having them transfer my balances from my other cards, instead of paying those accounts, this causes them an expense. I then pay the card off, which means they make no income from the transaction. It is not what they are hoping for and I hope their computer system is smart enough to figure it, since they can't and actually give me a limit that will hope with my goal. I doubt it though! I somehow made a mistake of actually paying them interest last year. The total came to $1.31. So they basically lose and I win. Even if they cancel my cards, it won't matter, I have 2 others one with a limit I can use in emergencies and the HSBC card, which I have a feeling will get a credit increase long before they take ownership of it. Their loss. They really need to reclassify some of us into at least a category between subprime and prime. Merrick Bank loves me and gives me credit line increases and I actually suspect soon they will offer me an unsecured card as I have noticed they just checked my credit report last week. I only wish they offered a rewards card, as I would be very happy with that! I would quickly close my CapOne cards if they offered me such a product!

  5. #5

    Default Re: Capital One Bank

    As the vultures circle overhead, HSBC USA and Capital One Financial are looking to close their sale in the second quarter of 2012. Questions that are arising equal what to do with the Orchard and Household Bank Credit Cards along with the Secured Cards since they compete with Capital One's. Thoughts include eliminating the HSBC equivalents. It will be interesting!

    Many of us on this FG site have strong views on Capital One's small credit lines and the attitude by Capital One Financial of just opening another credit card account with a small credit line. In the past, HSBC would grow some of their cards. For myself, closing down my two HSBC Cards will likely be the option as I have had seven Capital One Cards and only the business cards ever grew with me. I feel better now that I said that!
    Last edited by Wanderer; January 13th, 2012 at 07:54 AM.

  6. #6

    Default Re: Capital One Bank

    I'm proof that Capital One does grow with you, they originally granted me a credit line of only $300 but I was enrolled in the credit steps program and it was increased to $500 after 5 payments. I called the backdoor number that a Capital One representative gave me and was granted an additional $1,000 credit limit, making my new credit limit $1,500, they also lowered my APR from 22.9% to 17.9%.

  7. #7

    Default Re: Capital One Bank

    Well FG posters, it is all over but the crying. The Feds approved Capital One Bank USA NA purchase of the HSBC Bank Nevada USA Credit Card Unit (scheduled to take place during the second quarter 2012). Results will be less banks issuing credit cards. Don't get in trouble because you will have less options and Capital One does keep records of who didn't perform well with them. Speak with experience.


    Cut from the Comptroller's ruling:

    Comptroller of the Currency Administrator of National Banks
    250 E Street, SW Washington, DC 20219 (
    202) 874-5060

    March 9, 2012

    Richard Kim, Esquire Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019-6150

    RE: Applications by Capital One, National Association, McLean, Virginia, and Capital One Bank (USA), National Association, Glen Allen, Virginia, for prior approval to acquire substantially all of the assets and assume certain liabilities of HSBC Bank Nevada, Las Vegas, NV (the “Applications”).

    Application Control Numbers: 2011-NE-02-0028 and 2011-NE-02-0029

    The Office of the Comptroller of the Currency (“OCC”) here by approves the Applications by Capital One, National Association, McLean, Virginia (“CONA”), and Capital One Bank (USA), National Association, Glen Allen, Virginia (“COBNA”), to acquire substantially all of the assets and assume certain liabilities of HSBC Bank Nevada, Las Vegas, Nevada (“HSBC Nevada”). These approvals are granted after a thorough review of the Applications, other materials you have supplied, and other information available to the OCC, including commitments and representations made in the Applications and by the banks’ representatives during the application process.
    Last edited by Wanderer; March 17th, 2012 at 06:59 PM.

  8. #8

    Default Re: Capital One Bank

    Well HSBC Bank USA NA cardholders it has happened. I received a replacement HSBC Cashback Platinum Mastercard with a letter informing me that the issuer HSBC Bank Nevada was no longer the issuer. The new issuer is HSBC Bank USA, National Association effective to March 31, 2012 and is now governed by the laws of the state of Virginia whether you live in Virginia or not.

    If my memory serves me right that is where Capital One Financial headquarters from (I remember now, McLean VA). It seems the HSBC Brand Cards will remain through part of 2014.
    Last edited by Wanderer; April 18th, 2012 at 12:05 AM. Reason: Supp inf

  9. #9

    Default Re: Capital One Bank

    Quote Originally Posted by Wanderer View Post
    Well HSBC Bank USA NA cardholders. it has happened. I received a replacement HSBC Cashback Platinum Mastercard with a letter informing me that the issuer HSBC Bank Nevada was no longer the issuer. The new issuer is HSBC Bank USA , National Association effective to March 31, 2012 and is now governed by the laws of the state of Virginia whether you live in Virginia or not.

    If my memory serves me right that is where Capital One Financial headquarters from. It seems the HSBC Brand Cards will remain through part of 2014.
    It will be interesting to find out how Capitol One treats the former HSBC card holders! That carried they're premium cards like you do Wanderer! I know you said you dropped Capital One in the past. Will you do the same thing now that they took over the HSBC cards? Well I wish everyone good luck with Capital One!

  10. #10

    Default Re: Capital One Bank

    Quote Originally Posted by kdb030609 View Post
    It will be interesting to find out how Capitol One treats the former HSBC card holders! That carried they're premium cards like you do Wanderer! I know you said you dropped Capital One in the past. Will you do the same thing now that they took over the HSBC cards? Well I wish everyone good luck with Capital One!
    As I consider closing my HSBC USA NA Prime Credit Cards I had a hope that Capital One Financial might figure it out and try to act like a prime bank. So, maybe I should cool it for awhile. Based on the different postings on FG, I probably will NOT hold my breath. Most unfortunate!!!
    Last edited by Wanderer; April 19th, 2012 at 02:20 PM.

  11. #11

    Default Re: Capital One Bank

    HSBC brand cards are no longer allowed to be promoted, per directive of Capital One. Current cards and mentions must be removed, and Orchard Bank must not be promoted under HSBC or Capital One until further notice. I think this is all the legal steps they must take, but once it's all said and done, I'm not sure if Capital One will keep the Orchard line going, or market it towards another brand or with their own brand.

  12. #12

    Default Re: Capital One Bank

    Quote Originally Posted by Finance Globe View Post
    HSBC brand cards are no longer allowed to be promoted, per directive of Capital One. Current cards and mentions must be removed, and Orchard Bank must not be promoted under HSBC or Capital One until further notice. I think this is all the legal steps they must take, but once it's all said and done, I'm not sure if Capital One will keep the Orchard line going, or market it towards another brand or with their own brand.
    More... effective to May 1st, 2012 the HSBC USA Nevada NA bank and credit cards are being transferred to Capital One Financial, First Niagra Financial Group and HSBC Group will keep some HSBC Credit Cards such as their Premier Card. HSBC USA NA Nevada renumbered some Mastercards to fit them in with the combined system. The HSBC American Express, HSBC Discover and other related cards will be maintained and brought over to Capital One Financial at the same time. For the time being the cards may maintain the HSBC look without "The Worlds Local Bank" while Capital One Financial decides the final fate and outcome for the HSBC Cards.

  13. #13

    Default Re: Capital One Bank

    Thanks for the info Wanderer, this is very helpful.

  14. #14

    Default Re: Capital One Bank

    Has anyone ever gotten this message when you requested a CLI from Capitol One (or should I say Crapitol): Credit Bureau information is missing or unavailable???? Then it goes on to say that my credit score is missing or invalid. What the what??????

  15. #15

    Default Re: Capital One Bank

    No, but I have noticed that on my credit report as of a couple days ago, that my credit inquires that were HSBC now say "Capital One/HSBC". It's the first thing I have seen so far. I called a couple months ago, as I have the Direct Rewards Discover card. The agent, who I'm sure was there to answer a multitude of card types did say that my card would convert over to Capital One, but couldn't say if it would remain a rewards card or not? However, now that I think about it, when I try to access the rewards section of the webpage I have been getting an error message. Everything else looks the same. Still has the red logo and insignia as before. I plan on closing it in a few months to avoid paying the $59 annual fee, but I will hang on to it for now as I am curious to see what is to become of it.

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