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ANYONE CAN QUALIFY FOR A MAJOR CREDIT CARD!
Separated? Divorced? Bankrupt? Widowed?
BAD CREDIT? NO CREDIT? NO PROBLEM!
900-555-1111
* Make the call NOW and get the credit you deserve!
* Even if you've been turned down before,
you owe it to yourself and your family.
*
Your major credit card is waiting.
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Ads like this may appeal to you if you have a poor credit history or no credit at
all. Beware: while secured credit cards can be an effective way to build or
re-establish your credit history, some marketers of secured cards make deceptive advertising claims to entice you to respond to their ads.
Secured vs. Unsecured Cards
Secured and unsecured cards can be used to pay for goods and services.
However, a secured card requires you to open and maintain a savings account as security for your line of credit; an unsecured card does not.
The required savings deposit for a secured card may range from a few hundred
to several thousand dollars. Your credit line is a percentage of your deposit,
typically 50 to 100 percent. Usually, a bank will pay interest on your deposit. In
addition, you also may have to pay application and processing fees -- sometimes
totaling hundreds of dollars. Before you apply, be sure to ask what the total fees
are and whether they will be refunded if you're denied a card. Typically, a
secured card requires an annual fee and has a higher interest rate than an unsecured card.
Deceptive Ads and Scams
The Federal Trade Commission (FTC) has taken action against companies that
deceptively advertise major credit cards through television, newspapers, and
postcards. The ads may offer unsecured credit cards, secured credit cards, or
not specify a card type. The ads usually lead you to believe you can get a card
simply by calling the number listed. Sometimes the number is not toll-free. A
'900' number service, for which you are billed just for making the call, may
instruct you to give your name and address to receive a credit application, or
give you a list of banks offering secured cards. It also may tell you to call
another '900' number -- at an additional charge -- for more information.
Deceptive ads often leave out important information.
- The cost of the '900' call -- which can range from $2 to $50 or more;
- The required security deposit, application, and processing fees;
- Eligibility requirements like income or age;
An annual fee or the fact that the secured card has a higher than average interest rate on any balance.
How to Avoid the Scam
To avoid being victimized, look for the following signs:
- Offers of easy credit. No one can guarantee to get you credit. Before deciding whether to give you a credit card, legitimate credit providers
examine your credit report.
- A call to a '900' number for a credit card. You pay for calls with a '900' prefix -- and you may never receive a credit card.
- Credit cards offered by "credit repair" companies or "credit clinics." These
businesses also may offer to clean-up your credit history for a fee. However, you can correct genuine mistakes or outdated information
yourself by contacting credit bureaus directly. Remember that only time and good credit habits will restore your credit worthiness.
Credit Reporting
If you're considering a secured card as a way to build or re-establish a credit
record, make sure the issuer reports to a credit bureau. Your credit history is
maintained by companies called credit bureaus; they collect information reported
to them by banks, mortgage companies, department stores, and other creditors.
If your card issuer doesn't report to a bureau, the card won't help you build a credit history.
Using Credit Cards Wisely
More than three billion credit card offers are mailed to consumers each year.
These offers can be very enticing. Nearly every offer promises some special
benefit to a new card. In some cases, the offer is for a low rate. In others, no
annual fee is promised. These offers, however, never discuss the down side of a new card or the potential risks.
Ten Things To Think About Before Taking A New Card
1. Avoid accepting too many offers. There is rarely a good reason to carry
more than one or two credit cards. You should be very selective about
choosing cards which are best for you. Having too much credit can lead to bad decisions and unmanageable debts.
2. Remember that lenders are looking for people who will run up big balances, because those consumers pay the most interest.
You may find that credit companies are pursuing you aggressively by mail and phone. You
should not view this as a sign that you can afford more credit. The lender may
have a marketing profile based on your spending patterns, your credit record,
your use of certain services such as home shopping, your magazine subscriptions,
or even your zip code, which indicates to them that you are someone who is likely to carry a big credit card balance and pay a good deal of interest.
3. Interest rate is important, but not the only consideration. You should
always know the interest rate on your cards and should try to keep the rate as
low as possible. However, it is rarely a good idea to take a new card solely
because of a low rate. The rate only matters if you carry a balance from one
month to the next, and a temporarily low rate may encourage you to spend more
than you can afford. In addition, the rate can easily change, with or without a
reason. Remember that even the best credit card interest rates are relatively high rate credit.
Additionally, other terms of credit may add to the cost, so that a credit card
which appears cheaper is actually more expensive. Annual fees, late charges,
membership fees, and the method by which balances accrue can add to the cost of credit.
4. Beware of temporary "teaser" rates. A teaser rate is an artificially low
initial rate which lasts only for a limited time and often for limited charges, such
as transfers of balances from other cards. Most teaser rates are good only for
six months or less. After that, the rate automatically goes up. Remember that if
you build up a balance and pay it after the period of a temporary rate, the much
higher permanent rate will apply to your repayment plan. This means that the permanent long term rate on the card is much more important than the
temporary rate.
5. If your rate is variable, understand the basis on which it may change.
Variable interest rates can be very confusing. Some variable rates conceal
terms which ensure that your rate will go up steeply over time. Read the credit contract to understand how and when your rate may change.
6. Be careful about juggling cards to take advantage of teaser rates and balance transfer options.
It takes a great deal of time and effort to juggle cards to take advantage of terms designed to be temporary. Remember that all
teaser rate offers are designed to get you locked into the higher rate for the long
term, because that is how the lender makes the most money. Even people who
do successfully juggle many cards complain that use of numerous cards has a long-term negative impact on their credit record.
7. Investigate terms related to late payment charges and penalty rates of interest.
Many credit card contracts, including those which advertise low permanent rates have provisions in the small print to increase your rate of
interest if you make even a single late payment. This may be on top of late
charges or other penalties. You should review your contract to see if such terms apply.
8. Learn your credit card's billing method. It is important to understand
how you will be billed. If interest will apply from the date of your purchase
without a grace period, a low rate may actually be higher than it looks. If you
intend to pay off the balance in full each month, terms of the grace period are
important. You need to understand how the grace period works and remember
that many lenders do not mail bills until late in the grace period. Your payment
may be due quite soon after you receive the bill in order to avoid additional accumulation of interest.
9. Always read both the disclosures and the credit contract. You will find
disclosures about the terms of a credit card offer, usually in small print on the
reverse or at the bottom of the offer. Review these carefully. However, the law
does not require that all relevant information be disclosed. For this reason, you
must also read your credit contract, which comes with the card. This will include
terms such as late payment fees, default rates of interest, and a description of the
billing method. You have several choices if you do not understand these terms.
You can call the lender for an explanation. Or better yet, refuse credit with too
many complex provisions, because those terms are likely to work to your disadvantage.
10. If you do take a credit card and discover terms you do not like: Cancel!
Avoiding Problems: Things to Think About Once You Choose A Card
1. It is important not to use credit cards to finance an unaffordable lifestyle.
2. If you get into financial trouble, do not make it worse by using credit cards to make ends meet.
For example, if you use cash advances on your credit card to pay bills, the interest due will only add to your debt burden sooner
rather than later.
3. Don't get hooked on minimum payments. If you pay only the minimum,
chances are that you will not be paying down your debt, or that you will be
paying it off very slowly. Especially if you are also making new purchases every
month, the consequence of making minimum payments is that your debt will grow.
4. Don't run up the balance in reliance on a temporary "teaser" interest rate.
5. If you can afford to do so consistently with your budget plan, make your credit card payments on time
. Be careful to avoid late payment charges and penalty rates if you can do so without endangering your ability to keep up
with higher priority debts.
Also be advised that most lenders will waive a late payment charge or default
rates of interest one time only. It is worth calling to ask for a waiver if you make a late payment accidentally or with a good excuse.
6. Avoid the special services, programs, and goods which credit card lenders offer to bill to their cards.
Most of these special services such as credit card fraud protection plans, credit record protection, travel clubs, life
insurance, and other similar offers are a bad deal. Products offered are
generally overpriced. It is best to throw out advertisements, or at a minimum, to read them with a high degree of caution.
7. Beware of unsolicited increases by a credit card lender to your credit card limit.
Some lenders increase your credit limit even when you have not
asked for more credit. It is easy to assume that this means that the lender thinks
you can afford more credit. In fact, the opposite may be true. Lenders generally
increase the limit for consumers that they think will carry a bigger balance and
pay more interest. You need to evaluate whether you can afford more credit based on your individual circumstances.
Things To Think About If You Get Behind On Your Credit Card Payments
1. If you get into financial trouble, pay your higher priority debts first. If
your inability to pay your credit card debts is part of a larger financial problem
which affects your home, your car, and your high-priority debts, it is critical to
deal with the other problems first. Don't let yourself be pressured into keeping
up with credit card payments at the risk of losing a home or car.
2. Do not move credit card debt up in priority because the creditor threatens suit.
Credit card lenders are notorious for using aggressive debt collection agencies to collect from consumers. Whatever the collectors' tactics,
whether abusive or polite, don't let them convince you to use money set aside in
your budget for more pressing debts to make credit card payments.
3. If you can afford to pay something less than the full amount of your
credit card debts, contact each credit card lender and try to make a payment arrangement which fits your budget.
The lender might also agree to waive fees, lower interest rates, or otherwise change the terms to make your payments more affordable.
Secured vs. Unsecured Credit Cards
Most credit cards are unsecured, which means that the creditor has not taken
any collateral such as a home or car, for the debt owed. In general, all things
being equal, you should seek and use credit cards which are unsecured in
preference to those that are secured. Since interest rates on secured cards are
typically just as high as those on unsecured cards, the choice in favor of unsecured cards should be clear.
Note: There are three ways in which some credit card lenders take collateral.
1. Some credit card lenders, usually store credit such as Sears, claim to take collateral in items purchased with their card.
This means that if you have problems making payments, those lenders may threaten to repossess
property bought with the card. Although most threats to repossess personal
property are not carried out, it is a good idea to know whether the security
interest exists. If it does, you should use an unsecured card in preference to the secured card whenever possible.
2. Another type of secured credit card involves card balances secured by a bank deposit.
The card allows you a credit limit up to the amount you have on deposit in a particular bank account. If you can't make the payments
you lose the money in the account.
These cards are usually marketed as a good way to reestablish credit for those
who have had financial problems. They may be useful for this reason. However,
since almost everyone now gets unsecured credit card offers even after previous
financial problems, there is less reason to consider allowing a creditor to use a
bank deposit as collateral. It is preferable for you not to tie up a bank account,
or to pay interest to a lender for the privilege of establishing that you can afford to make payments.
3. Finally, there are increasing opportunities to obtain credit cards in connection with a home equity line of credit.
Each time the card is used, the balance is secured against the home. In many cases these are sold by home
improvement contractors who say it is a good way to pay for home
improvements. Sometimes the initial amount advanced on such a card is as much or more than the consumer's credit limit.
Home secured credit cards are almost always a bad idea.
The potential consequence of nonpayment is loss of your home by foreclosure.
You should also beware of home improvement contractors offering credit.
Seniors in particular are often the target of unscrupulous contractors who do not
act in their best interest. A better idea is a more traditional home equity credit line from a bank at a lower rate of interest.
Credit Card Disputes
There are two types of credit card disputes which commonly arise. The first
involves unauthorized use of a card, when someone steals, borrows or otherwise uses a card or card number without permission.
Under the law, a consumer's obligation for unauthorized use of a card is only
$50. This means, for example, that if a card is stolen, the credit card lender can
only charge you a maximum of $50 no matter how much the thief has charged on
the card. (Note: This limit may not apply to a "debit" card).
You should immediately make a report as soon as you know of an unauthorized
use of a card. If you call before the unauthorized use occurs, you cannot be charged even $50.
The second type of billing dispute which arises involves disputes about how
much you owe. The law provides a basis to dispute these incorrect bills.
Information about how to raise a dispute appears on the back of each bill,
including the mailing address to use. In summary, you must raise a dispute in
writing within 60 days of the first bill with the improper charge.[5]Â You must include the following information:
Name and account number;
The dollar amount in dispute;
A statement of the reason for the dispute
Some examples of reasons for dispute are:
I did not authorize this charge;
I did not receive the goods I ordered;
I returned the goods I ordered because they were defective, but did not get a credit;
The merchant sent me the wrong goods.
Dispute rights also apply to certain purchases on credit cards if you have
problems with the quality of the goods or services purchased. These apply
whenever the credit card lender owns the business from which the purchase was
made, or advertises the goods or services purchased. In addition, this special
right applies when the goods cost more than $50 and are purchased in your
home state or within 100 miles of your mailing address. In order to dispute a
charge for goods or services based on quality, you must have first made a good faith effort to resolve the issue directly with the merchant.
Once you raise the dispute, the credit card company is required to investigate
and report back in writing. Until the dispute is resolved, you do not need to pay
the disputed portion of the bill. However, payments to cover any undisputed amounts must be made.
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This page is based on information provided as a service of the National Consumer Law Center and the Federal Trade Commission. This
information is provided as a public service by the Law Office of Jim McMillen.
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