People with so-so credit can find
more choices and better card deals
Call them tweeners.
In the world of credit cards, they fall
somewhere between those folks who can't open a mailbox without
a low-rate card offer dropping out and folks stuck paying super-high
interest rates because of badly damaged credit.
Long neglected by card companies, tweeners
are getting noticed. And that means more choices and better
deals for middle-of-the-road customers who shop carefully.
"It's a growing market," says Don Berman,
president of Cardholder Management Services in Plainview, N.Y.
"There will be an ever-expanding amount of competition among
card issuers in this market."
Tweeners fall into two basic categories: people with "emerging"
credit, such as immigrants, and people with "recovering" credit,
such as longtime reliable customers whose credit has slipped and
who are trying to pull themselves back up.
"Sometimes it's a few months. Sometimes it
was a single incident. Sometimes it was a year or two," says Gerri
Detweiler, co-author of Invest
"I hear from consumers all the time about how
difficult it is to find good credit deals as they're trying to get
back on track."
Lots of times people have paid their bills
on time for years -- and then divorce, unemployment or an accident
throws them off course.
"Creditors have really, really short memories
in terms of how things used to be," says Catherine Williams, president
Credit Counseling Service of Greater Chicago.
Tweeners are also widows who've never applied
for credit on their own before and twentysomethings who charged
more than they could handle as students and have just landed that
first good job.
Credit card deals for tweeners tend to be nothing fancy, with annual
percentage rates ranging from the mid-teens to the mid-20s. Many
come with annual fees, which often range from $15 to $50. Credit
lines tend to be modest and often start at $500.
Some card companies cater exclusively to tweeners,
such as Atlanta-based CompuCredit.
"Our customers are really middle America. They
shop at Wal-Mart. They eat out at Red Lobster," says David Hanna,
president of CompuCredit.
"We've been able to identify and find people
who have fallen through the cracks and offer them credit ... They
pay their bills on time. They're good, creditworthy individuals
who have been ignored."
CompuCredit's key product is the Aspire Visa,
which is available as a standard, gold, platinum or diamond card,
depending on a customer's credit.
The average credit limit is $1,700. Annual percentage
rates start at 15.9 percent and reach well into the 20s. Credit
lines range from $500 to $10,000. Some Aspire Visa cards come with
annual fees of $30 or $40.
"Less than 10 percent of our accounts have annual
fees," says Rick Gilbert, chief operating officer at CompuCredit.
Tweeners may apply for standard and diamond
cards on the Aspire
Visa Web site. The cards are also available through LendingTree
Inc., an online loan site.
Other card companies who are active in the tweener
market include Top 10 issuers Capital
One and Providian,
and niche specialists such as Merrick
Bank in Salt Lake City.
Experts say almost every card company has some tweeners as customers
and that issuers will market more aggressively for middle-of-the-road
customers as credit scoring and modeling tools become more sophisticated.
How can someone with middle-of-the-road credit
land a good credit card deal? Start by chipping away at any current
card debt with several months of on-time payments. And then call
your card issuer.
"I would say if you had a year of on-time payments
it would be worth it to try to push an issuer to give you a better
deal," Detweiler says.
Williams adds, "Creditors know that acquiring
new customers is expensive and time-consuming, and if you're interested
in staying with them, they're interested in staying with you."
If they're not willing to sweeten that card
deal, shop for a better offer.
Compare annual percentage rates, grace periods,
credit limits and, most importantly, fees. Some cards come with
hefty application and processing fees. Avoid them. As with any card
offer, be sure to read the fine print.
keep an eye on you
Keep in mind that issuers are looking at more than just payment
history when they evaluate potential credit applicants. They also
look at income, debt and how long a person has been at their current
job and residence.
"Creditors get nervous. They want to know where
you are and what you're doing," Williams says.
Providian reviews its tweener credit accounts
each month. After several months of on-time payments, customers
are rewarded with larger credit lines.
"We grant more credit to them as they prove
themselves," says Seth Barad, executive vice president at Providian.
"We want to help people who are willing to use credit responsibly."
What about lowering a tweener's interest rate?
Barad says interest rates are adjusted on a case-by-case basis.
When shopping for credit cards, be sure to weigh each offer carefully.
Once you are a cardholder, monitor that account closely.
One common mistake is trying to take on too
much credit too soon. People with limited credit histories apply
for too many cards. Tweeners with past card debt start applying
for new cards before paying down some of their current card debt.
"They're out there casting around rather than
waiting, and that makes creditors nervous," Williams says.
Remember, one or two cards is plenty. Tweeners
can rebuild their credit and work their way up to better credit
card deals but it takes time. Regular, on-time card payments are
"You can't change your credit score overnight,
but you can do it," Detweiler says. "You have to be persistent.