How To Avoid The Secured Credit Card Scam |
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If this has caught your attention, it's likely that you have a poor credit history or none at all. Beware of deceptive advertising promises of secured credit cards, whose marketers will try anything to get a response from you. Otherwise, secured credit cards are effective in building or reestablishing your credit history. Provided periodic reporting to the credit bureau is ensured, secured credit cards can be a big help in re-establishing a creditor's confidence in a prospective borrower.
Both secured and unsecured cards are used to pay for goods and services. In the case of a secured card, you need to open and maintain a savings account as security for your line of credit; unsecured cards don't require this. The necessary savings deposit for a secured credit card may vary from a few hundred to several thousand in dollars. Typically ranging from 50%-100%, your credit line is a percentage of your deposit. Banks usually pay interest on deposits and there may be application and processing fees, which sometimes add up to hundreds of dollars. First, find out what the total fees are and if there is a refund on denial of a card before applying for one. Generally with a secured card there is an annual fee and an interest rate higher than for an unsecured card. Deceptive Ads and Scams The Federal Trade Commission (FTC) takes to task companies behind deceptive advertisements of major credit cards in television, newspapers and postcards. These ads may be for unsecured credit cards, secured credit cards or unspecified cards. They claim to get you a card merely by calling the number mentioned, which in some cases is not toll-free. A 900-number service bills you just for making the call and directs you to submit your name and address for a credit application or provides a list of banks offering secured credit cards. Such deceptive ads omit key details including the cost of the call, which can range from $2-$50, the requisite security deposit, application and processing fees and eligibility criteria like income and age. How To Avoid The Scam? Avoid falling victim by being on the lookout for signs like offers of easy credit. Credit can never be guaranteed. Legitimate card providers study your credit report before making a decision to give you a credit card. If it's a call to a 900 number for a credit card, you are charged for the calls with a 900 prefix but may never get a credit card. Credit repair companies or credit clinics offer credit cards. They claim to clean up your credit history for a fee. The fact is, genuine mistakes and outdated information can be corrected on your own through credit bureaus directly. It is only time and good credit records that will determine your creditworthiness. Conclusion If your intention is for a secured card to build or reestablish a credit record, make sure the issuer reports to a credit bureau. Credit bureaus are companies that maintain credit history, with information collected from banks, mortgage companies, department stores and other creditors. Without your card issuer reporting to a bureau, the card won't build your credit history. To do that applies for a charge card or small loan at a local store or lending institute. Find out if the creditor reports to a credit bureau, which if it does, will build you a good credit history, provided you repay debts regularly. |
