In a rather amazing turnaround, the Capital One card has comes into its own since the introduction of new credit card laws that took effect in 2010. By 2007, Capital One was receiving many consumer complaints focusing on poor customer service and predatory lending practices.
Founded in 1988, Capital One moved into the retail banking market in 2005 when it acquired Hibernia National Bank. This was followed by the purchase of North Fork Bancorporation in 2006 and Chevy Chase Bank in 2008.
Unlike other major lending banks, Capital One launched directly into the consumer lending market. Most banks prefer to diversify and work in the corporate lending market as well as providing financial services directly to consumers.
The ‘monoline’ business model followed by Capital One carries higher risk as consumer lending peaks when time are good and is extremely profitable. However, in time of economic stress the monoline model is at higher risk of losing profitability.
In the past generation, most lending companies using the monoline model have done well in the beginning only to disappear in a market downturn. They may go out of business entirely or be bought out by a larger and more standard financial institution.
The Economic Crisis
As the economy continued to fall in 2008 and into 2009, the entity known as Capital One sustained high losses. Rising unemployment and a crashing housing market left hundred of thousands of consumers without means to pay their credit card bills each month.
As a lender specializing in auto loans and consumer credit cards, Capital One quickly reduced available offers. Capital One accounts that had been widely advertised in the media were no longer available.
In 2008, Capital One was saved by $3.56 billion in governments funds in a bailout of financial institutions unparalleled in recent history. This provided the company with the backing to re-structure its business and within a year allowed it to buy back millions of shares of preferred stock held by the U.S. Treasury.
Advantages for Consumers
The business model for Capital One has changed. Customer service has been given a higher priority than before while the often predatory practices that previously generated thousands of consumer complaints have been eliminated by the new credit regulations.
Credit card accounts are now offered for all levels of consumer credit ratings. Previously, Capital One specialized in providing credit card accounts to consumers with credit problems.
Today, the Capital One website has been re-designed and is user friendly. Perhaps the most helpful part of the site is the addition of credit ratings necessary to be approved for various credit card accounts.
Capital One has continued to refine its credit card offers as the market has continue to change and as its business has begun to rebound. Currently, the categories of credit listed on the site are “average”, “excellent” and “rebuilding credit”. Previous categories of “good” and “poor” have been removed from the site.
The benefit to consumers is that by listing the credit required for approval, applicants will be able to apply for a card that suits their circumstances.
Excellent Credit
If you have an excellent credit rating, you can take advantage of a Capital One card with the lowest interest rates. There are no annual fees charged on the accounts for those with excellent credit and many carry introductory interest rates as well.
The VentureOne Rewards card from Capital One rewards the account holder with 1.25 miles earned per dollar spend on every purchase made. There is a full year 0% introductory APR and a 10.9%-16.9% variable APR after the introductory period has ended.
For cash rewards, the Capital One Cash Rewards credit card account is another choice if you have excellent credit. With 2% cash back offered at gas stations and grocery stores, this is a good rewards card to use for everyday purchases. A 0% introductory rate is good until December 2011 with a variable APR of 11.9%-17.9% after that.
Platinum Prestige offers a card designed to transfer high interest debt to a new Capital One Card. The 0% APR until December 2011 provides a full year in which you can pay down your transferred debt with no interest charges. The 9.9%-15.9% variable APR after the introductory period is reasonable in today? marketplace.
Venture Rewards Capital One allows you to earn a full 2 miles per dollar spend on every purchase you make with this credit card. You will need excellent credit to be approved for a new account and there is a $59 annual fee that is waived for the first year. The is no introductory rate offered.
As you can see from the range of interest rates listed, only those with stellar credit will be approved for the Capital One accounts listed above at the lower end of the rates listed.
Credit cards from Capital One are evenly spread between those offered to consumers with excellent credit and to those with average credit ratings.
Average Credit
If you have average credit, it may be due to a limited amount of credit or credit over a short period of time. It may be one negative on your credit report that has been overcome with a good payment record in recent months.
Depending on your credit rating, you might choose a Standard Platinum or Classic Platinum Capital One. Both have a 0% APR good until September 2011.
The Standard Platinum credit card has a variable APR of 24.9% while the Classic Platinum account offers 14.9%-19.9% APR but has an annual fee of $39.
The credit card from Capital One is for those who want a Cash Rewards card is available to those with average credit. You earn the same 2% cash back on gas and grocery purchases but will also pay a $39 annual fee.
The interest rate on the Cash Rewards card for those with average credit is somewhat higher and will vary from 14.9%-19.9% depending on your credit rating.
The Journey Student Rewards account is a cash back card that is designed to help students build credit. Average credit is required and there is no annual fee. The 19.8% variable APR is reasonable for a student who has limited credit due to his age and spending limits are usually lower than for other consumer credit cards.
Disadvantages
Capital One has re-invented itself in the past year or two. The focus on obtaining new customers by offering credit to those with poor credit has almost been eliminated from the business model. Instead, new focus is put on customer service that should help to reduce the number of complaints about Capital One accounts.
Summary
Capital One now list the level of credit you need in order to be approved for the various accounts offered by this lender.
If you are uncertain of your credit rating, obtain a copy of your credit report prior to applying for a new credit card.
For most consumers, the interest rate that will apply to a new Capital One card will be at the higher end of the APR range listed. If you apply for a new credit card and are approved, look at the terms of approval carefully to see if the final interest rate and fees offered fit your needs.
