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Secured Credit Card Marketing Scams
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Facts for Consumers from the Federal Trade Commission
Secured Credit Card Marketing Scams -- September 1993
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ANYONE CAN QUALIFY FOR
A MAJOR CREDIT CARD!
Separated? Divorced? Bankrupt? Widowed?
BAD CREDIT? NO CREDIT?
NO PROBLEM!
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.
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If you have no credit or a poor credit history, this ad may
appeal to you. Before you respond, read this brochure. Using a
secured credit card can be an effective way to build or
re-establish your credit history. However, be aware that some
marketers of secured credit cards make deceptive advertising
claims to get you to respond to their ads.
This brochure explains the differences between a secured and
unsecured credit card, describes how marketing scams are used to
sell secured credit cards, and tells how to recognize and avoid
deceptive credit card offers. Some organizations that offer
additional consumer credit information and assistance are listed
at the end of this brochure.
Secured versus Unsecured Cards
Secured and unsecured credit cards work the same way; both 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 savings account for a secured card may range from a few
hundred to several thousand dollars. Your credit line will be a
percentage of your deposit, typically from 50 to 100 percent.
Usually, a bank will pay interest on your deposit.
Also, you may have to pay application and processing fees that
sometimes amount to hundreds of dollars. Before you apply, be
sure to ask what the total fees are and if they will be refunded
if you are denied a card.
A secured credit card also typically requires an annual fee and
has higher interest rates than unsecured cards.
Deceptive Ads and Scams
The Federal Trade Commission (FTC) has taken action against
companies that deceptively advertise Visa and MasterCards through
television, newspapers, and postcards. The ads may offer
unsecured credit cards, secured credit cards, or not specify a
type of card. The ads typically are phrased to make you believe
you can get a credit card simply by calling a telephone number
listed in the ad. Sometimes the number is not toll-free. A
"900" number service, for which you will be billed just for
making the call, may instruct you to give your name and address
to receive a credit application, or it may give you a list of
banks offering secured cards, or direct you to call another "900"
number at an additional charge to get more information.
Be aware that deceptive ads often leave out important
information.
l They often omit the cost of the "900" telephone call, which
can range from $2 to $50, or more.
l The ads often do not mention a required security deposit,
and application and processing fees for the secured card.
l The ads frequently fail to say anything about income and age
requirements.
l The ads may not mention the annual fee for the secured card
and a higher than average interest rate on any balance.
How to Avoid the Scam
To avoid being victimized by a secured credit card marketing
scam, look for the following signals.
l Beware of 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 history
through a credit report.
l Think twice before making a call to a "900" telephone number
for a credit card. Remember: you pay for calls with a "900"
prefix and may never receive a credit card.
l Be wary of 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. But remember, only time and good credit will
repair your credit report if you have a poor credit history.
Credit Reporting
If you are considering a secured card as a means 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 that collect information reported to them
by banks, mortgage companies, department stores, and other
creditors. If your card issuer does not report to a credit
bureau, the card will not help you build a credit history.
For More Information and Assistance
l 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 you pay back your debts regularly, you will build a
good credit history.
If you cannot get credit on your own, you also can ask a relative
or friend with a good credit history to act as your co-signer.
The cosigner must promise to repay the debt if you do not.
l If you are interested in applying for a secured credit card,
the BankCard Holders of America (BHA) provides a list of
institutions offering secured cards. BHA's "Secured Card List"
is free to BHA members, $4.00 for non-members. Write to:
BankCard Holders of America
560 Herndon Parkway, Suite 120
Herndon, VA 22070.
l If you are having difficulty paying your bills, you may want
to contact a Consumer Credit Counseling Service (CCCS). This is
a non-profit organization with more than 850 offices located in
50 states that counsels heavily-indebted consumers. Check the
White Pages of your telephone directory to get the number for the
CCCS office nearest you, or call 1-800-388-2227 using a
touch-tone phone. If you have other questions, write or call:
National Foundation for Consumer Credit
8611 Second Avenue, Suite 100
Silver Spring, MD 20910
(301) 589-5600
To learn more about credit issues, send for the free FTC
brochures listed below. Write to: Public Reference, Federal
Trade Commission, Washington, D.C. 20580.
Building a Better Credit Record
Choosing and Using Credit Cards
Cosigning a Loan
Credit Repair Scams
Fix Your Own Credit Problems
"Gold" and "Platinum" Cards
Solving Credit Problems
Using Plastic: A Young Adult's Guide to Credit Cards
"900" Numbers
For a complete list of consumer and business publications from
the FTC, send for a free copy of Best Sellers at the address
listed above.
Where To Complain
If you have problems or questions about a secured credit card
marketer, contact your local consumer protection agency or state
Attorney General's office. You also may send your complaint to
the FTC. Write to: Correspondence Branch, Federal Trade
Commission, Washington, D.C. 20580. Although the Commission
cannot resolve individual disputes, the information you provide
may indicate a pattern of possible law violations requiring
action by the Commission.
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