London-based HSBC Holdings PLC is reportedly trying to sell its U.S. credit card portfolio to focus more on emerging markets. The company isn’t having much luck so far, in part because it’s a big issuer of retail-branded credit cards in the U.S. These cards tend to be accessible to people who have lower credit scores and are more likely to default. They also tend to have low credit limits, which then limit the amount of earning potential an issuing bank can collect.
Banks today are still risk-averse after being burned by sky-high defaults a couple of years ago. Forbes cites a Wall Street Journal report that Capital One is one financial firm kicking the tires of HSBC’s domestic card business. But HSBC’s CEO hasn’t ruled out the possibility of outright shuttering the division.
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If your credit card issuer sells off your account to another bank, what will happen? “They have to face the fact that there’s a new sheriff in town, so to speak. And that issuer can try to impose any changes that they like,” says Pamela Banks, senior policy counsel for Consumers Union. If you’re delinquent or have a history of nonpayment, the new issuer could decline to issue you a new card. If your account is in good standing, that’s not likely to happen; after all, the new owner did just pay to acquire all of these cardholder accounts.
But while you’d probably be able to keep your account if a new owner buys it, you might not want to, Banks warns. Thanks to 2009’s Credit CARD Act, a new credit card company can’t slap retroactive interest hikes on your existing balance, but they can jack up rates on new balances and add or increase fees that may compel you to cancel the card.
“When any business merges or buys a portfolio, the newer entity does an evaluation and if you’re on the bad side of the ledger, they can change the terms to get you to close the account or charge you more if you want to stay a customer,” she says. If an HSBC credit card is currently your only or your primary card, you might want to think about applying for a second card with another bank if your credit is high enough. That way, if a new sheriff does gallop in with guns blazing, you can close the account without cutting off your access to credit.