The Secured Credit Card Market

Larry Santucci

No 16-3, Consumer Finance Institute discussion papers from Federal Reserve Bank of Philadelphia

Abstract: In this paper, we present a brief exposition of the history of the secured credit card, beginning with its origins in California in the 1970s. We present a series of stylized facts based on a December 2015 cross section of the secured card market. We find that most secured cards require an annual fee, tend not to have promotional offers or rewards, and often have higher purchase annual percentage rates than their unsecured counterparts. We also find that the percentage of secured card accounts in a delinquency status is more than double that of unsecured cards and that far fewer secured cards are inactive compared with unsecured cards. In addition, the annual income of secured card consumers is about 43 percent lower than unsecured card consumers. Last, we examine how the credit scores of consumers opening a secured card account change during the first two years of account history. We find that keeping a secured card account open is correlated with improved creditworthiness, while closing an account, either in good standing or in default, is correlated with significantly reduced creditworthiness.

Keywords: secured; credit cards (search for similar items in EconPapers)
JEL-codes: D14 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2016-11-01
New Economics Papers: this item is included in nep-ban, nep-his and nep-pay
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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