Heed warning signals on secured credit card offers

November 21, 1993|By R. J. Ignelzi | R. J. Ignelzi,Copley News Service

Ads promising major credit cards regardless of your credit history can be very appealing -- especially if you have no credit or a lousy credit rating. But some credit card marketers make deceptive claims only to get you to respond, says the Federal Trade Commission.

The ads usually tout secured credit cards, which require you to open and maintain a savings account as security for your credit. Unsecured cards do not.

The savings account for a secured card may range from a few hundred to several thousand dollars. Your credit line will be a percentage of your deposit, typically from 50 percent to 100 percent. Usually, a bank will pay interest on your deposit.

You may have to pay application and processing fees that can amount to hundreds of dollars. Before you apply, be sure to ask what the total fees are and if they will be refunded if you are denied a card.

And a secured credit card also typically requires an annual fee and has higher interest rates than an unsecured card.

The FTC has taken action against companies that deceptively advertise Visa and MasterCards through television, newspapers and mailings.

The ads might offer unsecured credit cards, secured credit cards or not specify a type of card. The ads typically are phrased to make you believe you can get a credit card simply by calling a telephone number listed in the ad.

But sometimes the number is not toll-free. A 900-number service, for which you will be billed just for making the call, may instruct you to give your name and address to receive a credit application, or it may give you a list of banks offering secured cards, or direct you to call another 900 number at an additional charge.

And ads might leave out important information.

The ads often omit the cost of the 900-number telephone call, which can range from $2 to $50 or more. They often do not mention a required security deposit, or application and processing fees. And they frequently fail to say anything about ,, income and age requirements, an annual fee or a higher-than-average interest rate on any balance.

To avoid being victimized, look for the following signals:

* Beware of offers of easy credit. No one can guarantee you credit. Before deciding whether to give you a credit card, legitimate credit providers examine your credit history through a credit report.

* Think twice before making a call to a 900-number for a credit card. Remember that you must pay for calls with a 900 prefix and may still never receive a credit card.

* Be wary of credit cards offered by "credit repair" companies, which also may offer to clean up your credit history for a fee.

You can correct genuine mistakes or outdated information yourself by contacting credit bureaus directly. But, only time and good credit will repair your credit report if you have a poor credit history.

If you are considering a secured card as a means to build or re-establish a credit record, make sure the issuer reports to a credit bureau. Your credit history is maintained by credit bureaus, companies that collect information reported to them by banks, mortgage companies, stores and other creditors. If your card issuer does not report to a credit bureau, the card will not help you build a credit history.

If you're interested in applying for a secured credit card, the BankCard Holders of America (BHA) provides a list of institutions offering such cards. BHA's "Secured Card List" is free to BHA members and costs $4 for nonmembers. Write to: BankCard Holders of America, 560 Herndon Parkway, Suite 120, Herndon, Va. 22070.

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