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9009 West Loop South, Seventh Floor, Houston Texas
1-866-889-9347 |
CCCS of Greater Chicago
A Division of Money Management International
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Regional Headquarters - 70 East Lake St., Suite 1115, Chicago Illinois |
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Avoiding The Secured Credit Card Scam |
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It's nearly impossible to watch television these days without seeing an advertisement that screams, “BAD CREDIT? NO CREDIT? NO PROBLEM!” These ads usually continue to offer a secured credit card with an absolute guarantee of approval if you apply.
If you have no credit history or have had credit problems, these ads may sound like an answer to all your dreams. Unfortunately, for many people who sign their names before reading the fine print, they turn into a nightmare.
When used properly, secured credit cards are an effective way to establish a good credit rating or rebuild a bad one. However, some of the offers are deceptive and can end up costing a lot of money.
First, there is a big difference between a secured credit card and a regular one. With a secured card, you are required to open and maintain a savings account at the bank from which the card is issued. Your credit limit on this card is the amount of the money you deposit or a percentage of that amount.
The advantage of a secured card is that no one, except for you and the bank, knows that your credit card is secured. Also, most people will be approved because repayment is virtually assured and the risk is minimal. After a year or two of consistently making the payments on time, your account can be switched to an unsecured credit card and you get access to the money in your savings account again.
The disadvantage of a secured credit card is that, if you default on the balance of the credit card, the bank keeps the money in your account and the card is cancelled. Also, some issuers charge exorbitant application and processing fees. Most secured cards charge an annual fee and higher interest rates than regular credit cards. It is important to find out what these fees and interest rates are, and if the fees will be refunded if the application is declined.
Avoiding the Scam. Many of the advertisements for secured credit cards lead you to believe that you can receive one simply by making a phone call. Often, the number they provide is a “900” number that costs up to $50 to call, and you may be billed for the cost of the call even if your card is not approved. These ads typically leave out the costs of the offer, including application fees, processing fees, annual fees, and high interest rates.
They also claim that they can get almost anyone approved for a credit card, but completely omit or gloss over the requirement of a deposit into a secured savings account. Usually any offer of “easy credit,” regardless of your credit history, falls into the category of “too good to be true.”
Building a good credit rating takes time. There are no short cuts, even though a reputable secured card can be a valuable tool in getting there. Make sure the card issuer reports to the credit reporting bureaus. Otherwise, the card will do you no good.
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CCCS, A Division of Money Management International
Regional Headquarters - 70 East Lake St., Suite 1115, Chicago Illinois
Corporate Address - 9009 West Loop South, Seventh Floor, Houston, TX 77096
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