People may have encountered advertisements offering credit cards for those with bad credit or no credit. No matter a person’s current credit situation, they are told to call a number to receive their credit card. However, these ads may only be trying to tempt a person into calling when no real credit card offers are available.
Legitimate banks offer secured credit cards. They market these cards as a way for people with limited credit histories to begin building the kind of credit history that would qualify them for a standard credit card in the future.
After applying for a secured credit card, a person is asked to put down a cash deposit with the financial institution that offers the card. The amount of the deposit typically equals the credit limit on the card. This cash deposit differentiates a secured credit card from an unsecured credit card. A regular credit card is not secured by a deposit equal to the card’s credit limit.
Once a person has their secured credit card, they can use it like any other credit card to make purchases. The bank or credit union that issues a secured credit card should report it to the three major credit reporting agencies, TransUnion, Equifax, and Experian. So a person’s positive payment history should work to help build the person’s credit history and credit score.
Of course, the person would pay interest on any unpaid balance on the credit card, just as with an unsecured credit card.
What Is a Secured Credit Card Marketing Scam?
A secured credit card is used to pay for goods and services like a regular, unsecured credit card. However, again, to get a secured credit card, a person must deposit some money with the bank that issues the card. The money deposited serves as security for the card. That is, the money deposited is a kind of guarantee that charges made to the secured card will be paid.
If someone does not deposit money in an account, they will not get a secured credit card. Other requirements for a secured card may include the following:
- The required savings deposit might range from a few hundred to an amount that equals the credit limit on the card;
- The bank would pay interest on the deposit, and it would probably be quite a low rate of interest, i.e., something like the rate a bank pays on an ordinary savings account;
- A person may have to pay application and processing fees to get the secured credit card;
- There may be an annual fee, as there is with most credit cards;
- The card owner will probably pay a higher interest rate on the secured card than they would pay for an unsecured card.
Before a person applies for a secured credit card, they should ask what the total fee for applying is and whether they will get the fee back if denied a card. They probably want to pass on the offer if the fee is too high or they are told it will not be returned.
What Does the Scam Consist Of?
Some companies use TV, newspapers, and postcards for advertising secured credit cards deceptively. The unsuspecting consumer is led to believe they can get a card simply by calling a phone. This number may be a 900 number, and the person may be charged a fee for making the call to the 900 number. The fee can range from $25 to as much as $50 or more.
A person may then be told to call other 900 numbers for more information, and there are additional fees for the calls. The ads probably do not inform consumers of a charge for calling the 900 number. The person generally does not end up getting a secured credit card.
How Can I Avoid Being Scammed?
There are some things that a person should think about when confronted with this kind of advertising:
- Do not call 900 numbers that are featured in advertising. Again, a person may be charged a fee for making the call and probably will not receive a card of any kind;
- Be wary of cards offered by “credit repair” companies. These companies may offer to clean up a person’s credit history for a fee. But a person does not need to go through these companies to clean up their credit history or get a secured credit card. There are other, better ways to achieve these goals;
- Do not fall for offers of easy credit. Credit that a person would want to have is not something a person gets from calling phone numbers.
No company can ever guarantee that a person will be given credit. Before giving anyone loans or credit cards, a legitimate lender always looks at the credit report of the person applying and makes a decision after collecting information about the person’s current financial situation, e.g., whether they are employed, how much they make in salary or wages, whether they own a home and the like. No one would extend credit to a person without taking these steps.
How Can I Establish a Good Credit History?
To build a good credit history and credit score, a person may want to start by applying for a charge card at a department store or a credit union. A person wants to ask if the store or credit union reports transactions to the credit reporting agencies. Then the person wants to pay the minimum amount required every month reliably and on time. This is critical.
If a person gets credit and then repays it as required without delay, they build a good credit history and become able to apply for more credit or more favorable kinds of credit in the future.
If a person finds that they can’t get good credit, they can ask a relative or a friend with a good credit rating to cosign a loan. A person who cosigns a loan promises to repay it if the borrower does not. Again, if someone obtains credit with a co-signer, they want to repay it as required.
If someone has loans or cards and is having trouble paying bills, they may want to talk to a legitimate credit counseling service. There are non-profit organizations in every state that help consumers who are having trouble managing their debt. Counselors try to negotiate a manageable repayment plan for the debtor and their creditors. They also can help a person figure out a realistic budget. These counseling services are provided at very low cost or even for free.
Universities, military bases, credit unions, and housing authorities sometimes operate non-profit counseling programs. Or a person might ask their local bank or consumer protection office to see if it has a list of legitimate and low-cost financial counseling services. A person does not need to pay much money to a credit repair service and should resist ads that offer these services.
If a person believes they have been unfairly or wrongly denied credit for which they qualify, they want to consult a credit lawyer for help.
Do I Need a Lawyer for Help with Credit Scams?
An experienced consumer protection lawyer can help you determine whether an advertisement for a secured credit card or any other kind of credit is a scam. However, the best advice is to make yourself aware that such scams exist. If you know what to look for, you can avoid getting into trouble with secured credit scams.
A bankruptcy lawyer might also be able to help you if you believe you have been scammed into applying for credit or if your debt has become unmanageable. They might be able to connect you with services that can help you with your situation.