
Originally Posted by
Melonie
As I said, the problem has nothing to do with the fact that the bank might lose $300 (or break even on a secured credit card) because of one particular cardholder goes bankrupt (again). The problem has everything to do with an overall statistic that the bank's total loan portfolio has such and such of a risk rating. If one particular cardholder goes into Chapter 13 bankruptcy, it incrementally drags down the bank's risk rating for the next five years because that account must be kept on the bank's books for the duration of the bankruptcy. When the bank borrows more money from a 'bigger bank' in order to make future car loans, credit card loans etc to new customers, the existance of a higher risk rating could force the bank to pay a 0.1% higher rate of interest to the 'bigger bank'.
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