If a person has no credit or bad credit, the only type of credit card they will likely be approved for is a secured credit card or an unsecured credit card with very high interest rates or high fees. The Federal Trade Commission warns against deceptive advertising claims to entice people to respond to credit card ads.
How Legitimate Secured Credit Cards Work
Secured credit cards work in a variety of different ways, depending on company terms and conditions. The majority of companies require a person to make a deposit and the amount of the credit line is based on the percentage of the deposit. Credit lines for secured credit cards range from 50 to 100% of the deposited amount.
In addition to making the security deposit, most secured credit cards have application fees, annual fees, and high interest rates. Make sure to inquire about all fees associated with a secured credit card before applying for this type of card.
Scams and Deceptive Ads Related to Secured Credit Cards
Certain credit card companies are known for deceptive advertising on secured credit cards. The Federal Trade Commission takes action against these companies. Ads lead people to believe they can obtain a card simply by calling the number listed. However, these numbers are not always toll free. Never call an advertisement for a credit card that lists a phone number with a "900" exchange. The credit card company can charge for this call. This type of charge can cost between $2.00 and $50.00 or more.
Deceptive ads also advertise a guarantee of credit or easy credit. Legitimate credit card companies will always examine credit reports before offering a line of credit. Credit card companies or credit repair companies that offer to clean up a credit history for a fee are often scams. People can fix their own credit reports if a mistake or outdated information appears on a report. Contacting credit bureaus directly will fix any errors without having to pay a company to perform this service.
Where to Get a Legitimate Secured Credit Card for People with Bad Credit
Before applying for a secured credit card, make certain the issuer of the card reports to a credit bureau. Credit histories are maintained by companies using credit bureaus. This information will be needed in order to establish or re-establish the credit history. If a company does not report to a legitimate credit bureau, the card will not help the credit history.
It is always best to apply for a secured credit card from a top credit card company. Examples of reputable credit card companies offering secured credit cards are American Express, Discover and Bank of America. Always check the fees and interest rates, even with top reputable credit card companies.
Considerations for Secured Credit Cards
Establishing good credit is necessary in order to purchase a home or a vehicle. A good credit history will allow people to obtain unsecured cards in the future. Unsecured credit cards do not need security deposits. Always review the terms of credit cards before applying. If the credit card company is charging high fees and interest, it is best to look elsewhere. Complaints can be filed to the Federal Trade Commission regarding fraudulent, unfair business practices, and deceptive ads by credit card companies.
References:
- Federal Trade Commission, "Secured Credit Card Marketing Scams" accessed March 24, 2010
- BCS Alliance, "Secured Credit Cards" accessed March 24, 2010
Sandra Blake - Sandra resides in Ohio. She attended the Academy of Health Sciences and Columbus State. She has years of experience in health information ...
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