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Target Corp. is tightening the terms and underwriting criteria for all credit card customers in areas hit hardest by declining home values, including California, Arizona, Florida and Nevada, company executives reportedly told analysts yesterday at an investment-community meeting in Minneapolis. Target also is increasing its collection activity and is tightening standards for potentially struggling cardholders who reactivate cards after a period of inactivity. Target says overall credit card use among its customers is down for the first time since 2003. In its monthly corporate filings to the U.S. Securities and Exchange Commission this week, Target reported that its annualized net charge-off rate for September rose to 10.12% of principal receivables, up from 9.86% in August and 9.08% in July. Target executives said they expect its net charge-off rate for the full year to be about 9%, the company told analysts. Target in May sold approximately 47% of its credit card receivables to JPMorgan Chase & Co. for $3.6 billion in cash, which Target said significantly boosted its liquidity. Scott Strumello, an associate with Westbury, N.Y.-based Auriemma Consulting Group Inc., tells CardLine many credit card issuers are struggling to maintain positive customer relations while they boost collection calls and reduce some cardholders' credit limits. "Issuers know that if they are too aggressive, they run the risk of turning customers off," he says. "So they are taking a very surgical approach to this, using a scalpel instead of a hatchet."
