Personal Debt Issues
Secured credit cards help rebuild credit, but can come with unnecessary costs
by Broderick Perkins
(9/9/2011) Erate Exclusive - You've suffered a foreclosure, short sale or
other black mark on your credit report and want to rebuild your credit.
Take a look at secured credit cards, but be sure to read the small print
and watch out for inducements that can cost you unnecessarily.
If you have had trouble getting approved for a regular unsecured credit
card, a secured plastic could put you on the right track to a better credit
Secured credit cards require that you open an account and deposit money
as collateral in case you can't make a payment. The deposit varies from a
few hundred dollars to $1,000 or more.
Your credit limit is typically based on your deposit, that is, if you
deposit $500 your credit limit is $500.
Your interest rate, fees and maintenance costs vary from on card to
another and the details are in small print so tread softly and read all the
disclosures and terms that come with the account, before signing on.
Free sites like Credit.com, CreditCards.org, Bankrate.com and others let
you compare the terms and costs.
Erate.com offers secured credit card shopping tips.
Not to be confused with prepaid cards, but just like traditional
unsecured credit cards, secured credit cards report your payment activity
and account information to credit bureaus. That means it's important to make
timely payments and avoid using too much of your available credit. Payment
histories make up 35 percent of your credit score.
While secured credit cards can be an effective way to build or
re-establish your credit history, and come with the same Credit Card Accountability, Responsibility, and Disclosure
(CARD) Act of 2009 protections afforded regular credit cards, the Federal Trade Commission says beware.
Marketers use the secured credit card hope of improved credit to lure you
into paying unrelated fees.
Be wary of television, newspaper, direct mail and Interned ads that
appeal to those who have a poor credit history or none at all, by claiming
"Anyone can qualify for a major credit card!"
The ads mislead you into believing getting a card is as simple as calling
a '900' number, but no one can guarantee you even a secured credit card.
When you do call a 900 number, however, you will be billed for the
Bogus "credit repair" and "credit clinics" also similarly pitch the
The services typically also ask for your name and address and other
information to receive a credit application, or they give you a list of
banks offering secured cards.
You also may be instructed to call another 900 pay-per-call number "for
What the come-ons don't tell you, in addition to the cost for the call,
How, beyond sending you an applications, they will use your
You may have to pay a security deposit and application and/or
Some cards also come with an annual fee.
The cards typically also comes with additional eligibility
requirements, including income and age. No one can guarantee you a card.
Bona fide secured credit card issuers have to check your credit
report and other qualifying information. You simply may not qualify, even
for a secured credit card, but calling the 900 numbers will cost you.
The FTC advises you to stay away from offers of easy credit, especially
those that come with a 900 pay-for-call prefix.
You should be the one to initiate shopping around for a secured credit
card -- or any credit card, for that matter -- without the pressure of an
tabloid type "spoofing" threatens your credit card information
scores cloudy with a good chance of confusion
Credit Cards vs
plastic doesn't have to melt down your credit score
laws protect consumers from more credit card debt