In a move one observer calls a “productization” of credit card services in reaction to the implementation of the Credit Card Accountability, Responsibility and Disclosure Act, Household Bank is offering its credit card customers the ability to opt in to over-limit coverage.
The New York-based issuer this month sent some cardholders e-mails promoting the service as a way to manage finances when unexpected circumstances might cause them to exceed their card’s credit limit. To opt in, cardholders may click a box on the account Website. HSBC charges $30 for the service once they go over limit even if it is multiple times during the same billing cycle, according to Household’s Website.
Without the coverage, the issuer will decline transactions that exceed the cardholder’s credit limit. Household’s parent, HSBC Finance Corp., declined to comment.
Other major card issuers, including Citicorp, Bank of America Corp. and JPMorgan Chase & Co., are not offering a similar opt-in service, according to company spokespeople.
Many card companies have had over-limit strategies, but they required the issuers to evaluate their the cardholders’ card-account activity and their ability to pay, a practice many issuers have put on the back burner in past years, says Megan Bramlette, managing associate at Auriemma Consulting Group of Westbury N.Y.
But with the new disclosures required by the Credit CARD Act, Household appears to be using the service as a way to “productize” the option for cardholders to exceed their credit limits, she says.
“The theme of ‘productization’ has always existed,” she says, noting Citibank in the 1990s promoted its ID-theft service, which Citi branded as part of their Citi’s card services to differentiate itself from other card issuers. “It’s not always a new thing, but if an issuer puts a label on it, they’re saying: ‘We’re special because we have this product and we’re treating our customers better than our competitors.’”
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