Secured
Credit Card Marketing Scams |
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. |
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.
For More Information
- To build a credit record, you may want to apply for a charge card or a small loan at a
local store or lending institution. Ask if the creditor reports transactions to a credit
bureau. If they do -- and if you pay back your debts regularly -- you will build a good
credit history.
If you cannot get credit on your own, you can ask a relative or friend with a good
credit history to act as your cosigner. The cosigner promises to repay the debt if you
don't.
- If you're interested in applying for a secured credit card, the BankCard Holders of
America (BHA) provides a list of institutions offering secured cards. Send a check or
money order for $4.00 to:
"Secured Credit Card List"
BHA Customer Service
524 Branch Drive
Salem, VA 24153
- If you're having problems paying bills, you may want to contact a credit counseling
service. Non-profit organizations in every state counsel consumers who are in debt.
Counselors try to arrange a repayment plan that is acceptable to you and your creditors.
They also can help you set up a realistic budget. These counseling services are offered at
little or no cost to consumers. You can find the office nearest you by checking the White
Pages of your telephone directory.
Sometimes, non-profit counseling programs are operated by universities, military bases,
credit unions, and housing authorities. They are likely to charge little or nothing for
their services. Or you can check with your local bank or consumer protection office to see
if it has a list of reputable low-cost financial counseling services.
Where To Complain
The FTC works for the consumer to
prevent fraudulent, deceptive and unfair business practices in the
marketplace and to provide information to help consumers spot, stop and
avoid them. To file a
complaint or to get free information
on consumer issues, visit
www.ftc.gov or
call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The
FTC enters Internet, telemarketing, identity theft and other fraud-related
complaints into
Consumer Sentinel, a
secure, online database available to hundreds of civil and criminal law
enforcement agencies in the U.S. and abroad.
|
FEDERAL TRADE COMMISSION |
FOR THE CONSUMER |
1-877-FTC-HELP |
www.ftc.gov |
|
October 1996 |