Secured Credit Card Marketing Scams
Ads like this may appeal to you if you have a poor credit history or no credit at all:
ANYONE CAN QUALIFY FOR A MAJOR CREDIT CARD!
Separated? Divorced? Bankrupt? Widowed?
BAD CREDIT? NO CREDIT?
- 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.
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.