Your Credit Card Debt Might Get Sold—Here's Why Banks Do It and What You Should Know

When you’re struggling with credit card debt, you might assume your problem stays between you and your card issuer. But the reality is more complicated. Banks don’t always hold onto the debt they create. Instead, they sell it to other lenders—sometimes for pennies on the dollar. In 2017, for example, Barclaycard transferred $1.6 billion worth of credit card balances to Credit Shop Inc., a personal loan company. This kind of transaction happens regularly, and it’s worth understanding what it means for you.

Understanding Why Banks Are Willing to Sell Your Debt

So why would banks sell debt at all? The answer lies in how financial institutions think about risk and profit. When a bank issues a credit card, they’re not just hoping you’ll pay them back—they’re banking on it to generate steady income. American Express, for instance, earned $1.4 billion in interest income in just one quarter of 2016. That’s the kind of money credit card companies love.

But here’s the catch: not all borrowers are equally profitable. Some people have excellent credit and pay reliably. Others have shakier financial histories and represent a bigger risk of default. Credit card companies charge different interest rates depending on how likely they think you are to repay—the riskier you seem, the higher your rate climbs. That’s where the strategy gets interesting.

Banks have to decide: do we want to keep these higher-risk accounts and hope we make enough in interest charges to cover our losses? Or do we sell the problem to someone else? Many banks choose the second option. They offload these “subprime” or “near-prime” accounts—the ones belonging to borrowers with less-than-stellar credit—to specialized lenders who are more willing to gamble on risky portfolios.

When Higher-Risk Borrowers Become a Profit Opportunity

Here’s something counterintuitive: while traditional banks might see riskier borrowers as liabilities, other lending companies view them as opportunities. These specialized lenders will purchase batches of credit card debt specifically from accounts that larger banks have decided are too risky to keep.

Why would anyone want to buy risky debt? Because the potential payoff can be substantial. If you’re a subprime borrower, you’re already paying a much higher interest rate to compensate for your perceived risk. A lender that acquires your account can try to squeeze more revenue by pressuring you to get current on your payments, or they might offer you a balance transfer card that consolidates your various debts and temporarily reduces your rate. Either way, they see profit potential where traditional banks see danger.

The irony is that banks are simultaneously selling off their riskier customers to other lenders while actively trying to recruit new premium customers with high-reward credit cards. It’s a segmentation strategy: premium customers get targeted with cashback and travel rewards, while higher-risk customers get packaged and resold to specialists.

What Happens After Your Debt Changes Hands

In many cases, you won’t even realize your debt has been sold until you get a call from a new creditor or a debt collector representing the new owner. And here’s an important detail: once a lender buys your debt, they can turn around and sell it again to yet another company. Your account could change hands multiple times before anyone finally collects.

When you first hear from someone new claiming you owe them money, it’s natural to be confused or skeptical. That’s actually healthy. The law protects you in this situation.

Protecting Yourself from Aggressive Collection Tactics

The Fair Debt Collection Practices Act, which has been in place since 1997, sets clear rules about how debt collectors can contact you. They can’t call excessively, they can’t threaten violence, and they absolutely cannot impersonate credit agencies or attorneys. If a debt collector calls, you have rights.

Most importantly, you can demand written proof that the debt actually exists and that the amount they claim you owe is accurate. Make this request in writing within 30 days of first contact, and all collection calls must stop while they investigate. You can also request that all future communication happen only in writing—no more calls at work or home. If collectors violate these rules, you can sue them. The Federal Trade Commission provides detailed information about your rights on its website.

Why Banks Keep Trying to Sell You New Credit Products

Understanding this entire cycle reveals something important: banks have strong financial incentives to keep selling credit cards and personal loans, regardless of whether you already carry balances on existing accounts. The commission structures and profit models reward volume.

This is why you receive constant offers for new credit products even when you’re in debt. Banks make money on fees, interest charges, and balance transfer offers. They’re not trying to help you consolidate debt—they’re trying to generate more revenue streams from your financial struggles.

How to Avoid Becoming a Casualty of This System

The good news is that you have more control than you might think. You can generally keep your account from being sold to aggressive debt collection agencies by staying current on your payments and not letting balances spiral out of control.

Under the CARD Act of 2010, card issuers must give you at least 21 days from your statement date to make a payment. Aim to pay down as much as possible during that window—ideally the entire balance if you want to avoid accumulating interest charges. Banks are also required to provide 45 days’ notice before raising your interest rate. When you get that notice, take it seriously: either pay off the account if possible or transfer your balance to a lower-rate card immediately.

By understanding why banks buy and sell debt, and why they’re constantly trying to sell you new credit cards and personal loans, you can make smarter decisions about your credit. Stay informed, pay on time, and don’t let your debt become someone else’s profit opportunity.