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Credit Card Traps?
by Joseph Kenny
For people with a spotty credit card history or bad credit, it can be
difficult to get approved for a regular credit card. There are a number of
credit card options that are aimed specifically at people who have bad
credit and are trying to rebuilt it. There are also, unfortunately, a lot
of folks out there who'll take advantage of the desperation to get a
credit card. How do you tell which options are good ones and which are
just taking advantage of a bad situation?
Catalog clubs and store cards disguised as credit cards for people with
bad credit are one of the most commonly used scams that prey on people who
think they need a credit card. They may masquerade as a way to rebuild
your credit, or offer you a 'pre-approved credit card with a spending
limit of ' anywhere from $1500 to $5000.
What's the catch? Let's take a look at one that I received in the mail the
other day. "You are already approved for this credit card!" the letter
said in the very first line. All I had to do was call to verify my details
and activate my credit card and I could start using it immediately to make
purchases 'from our catalog of excellent value items'.
The 'credit card type' I was being offered was one for a single catalog
company, good for purchases from their catalog only. It offers a credit
limit of $6,000 - but I can only spend it on products that they sell. What
products? "Name brand electronics and computers, house wares and other
quality products" the letter goes on to say - but there are no details.
In addition, it tells me, because they're so happy to have my business,
they'll automatically credit me with $250 to spend immediately - upon
receiving my activation fee of - you guessed it - $250. I can also get
another $199 credited to my account - as soon as I pay my annual fee of
$199. And to really sweeten this bogus credit card deal, they tell me,
it's a great opportunity to rebuild my credit.
That one letter is a veritable shopping list of everything to watch out
for in bogus credit card offers. To list them:
1. The card can only be used to purchase items from the company that
issues it. Since I have no way to review the items offered without
activating the card - for $250 - I have no way of knowing how their prices
compare to the prices I'd find elsewhere, but I can guess that the prices
will be outrageously high.
2. The activation fee is outrageously high already. But I get it back,
right? Not exactly. By activating this 'credit card' I'm committing to buy
$250 worth of unseen merchandise from a merchant that I don't know.
3. Ditto the $199 annual use fee. While many credit cards that are aimed
at helping people rebuild their credit have annual fees, the average is
$25 to $50. Again, the annual fee is a disguised way of committing you to
spending $200 on their merchandise this year - merchandise that I can't
evaluate in advance because I have to be a member to see their catalog.
4. Rebuilding your credit is the one thing that this 'credit card' will do
- but nowhere near as much as if you'd taken that $449 total and invested
it in a secured credit card.
Our advice is to do exactly that. If you can come up with a $250
activation fee, find a good deal on a secured credit card and put it there
instead. In the long run, you'll do far better than if you accept the
catalog company's generous offer to allow you to spend your money on their
products.
About The Author:
Joe Kenny writes for the credit card comparison sites http://www.creditcardstore.co.uk
and also http://www.cardguide.co.uk
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