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Credit Card Companies Target Rich

"US Credit Card Groups Target the Wealthy" (subscription required) was the headline in Monday's Financial Times that caught my attention. For years, big lenders targeted "sub-prime" borrowers, who carried fat balances and paid exorbitant interest rates. But lenders learned a lesson during the financial crisis: some of those risky borrowers simply couldn't pay even the minimum amount when tough times hit.

So, the crafty card companies are shifting their marketing efforts to prime and super-prime borrowers, or those with the highest credit scores . While many of these folks dutifully pay off their bills monthly, there are plenty who don't and card companies can make plenty on the later group.

I wanted to discuss this new trend on television this morning and was happy when one of the card companies (Chase) obliged with not one, but two separate mailings, which were waiting for me last night when I got home.

The perfect timing not only gave me great props for the segment with WCBS-TV, it also allowed me to review the terms and highlight the real benefits (yes, there are some!) and the dangers of these tantalizing deals.

The first offer from Chase Freedom is sweet--$150 cash back after the first purchase and unlimited 1 percent cash back on all purchases. But if you aren't careful, the 11.99 percent APR zooms to 29.99 percent.

The second mailing from Chase was an "Exclusive Offer" for a Continental Airlines Presidential Plus rewards card. The envelope was so fancy, that I was half-expecting that is was a wedding invitation!

The usual $395 membership fee would be waived for a year and the plan allows borrowers to garner airline mileage and other amenities like priority check-in and free checked bags. The interest rate is higher than that of the cash back card at 14.24 percent APR and jumps to the same 29.99 percent if you're late.

I guess I should feel honored that I am considered a good credit risk, but after reading through the fine print, I realized that the last part of the TV segment was even more important for consumers. For the record, I have had the same two credit cards since college graduation!

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