Secured, or prepaid credit cards are generally used to help people rebuild their credit, raise their FICO scores, or increase the line of credit that companies are typically offering them. The term “secured” comes from the fact that you must open a savings account and deposit a minimum amount of money (usually $200 or more) into the account before you can use the card. Your savings account generally reflects the amount of credit you have on the card. Secured credit cards generally accept everyone (since they have nothing to lose), and are an easy way to start building or rebuilding credit.
Unsecured Credit Cards are simply credit cards that do not require a security deposit on the account. This type of card the most common, and is often subject to credit checks and credit approval. Unlike a secured credit card, you generally cannot increase the credit limit whenever you want to, but have to wait until you sufficiently built up your credit history. Read Why Build Good Credit
Those that qualify for an unsecured credit card usually don’t bother with prepaid since they don’t require hundreds of dollars to activate and they often have much lower interest rates and fees than a secured credit card.
So, which one is better: secured or unsecured? Here’s a little secret: your credit report does not reflect whether you have a secured or unsecured credit card. So, the one that you should choose depends on your situation:
•If you have a bad credit score and cannot get approved for other credit cards, or if you want to increase the lines of credit other companies are willing to offer you, you should consider getting a secured credit care.
•If you have a decent credit score and you want lower interest rates, then you should go with an unsecured credit card.
Prepaid Credit Card Scams
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.
You may have seen an ad like the one above. It’s designed to appeal to you if you have a poor credit history or no credit at all, but 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. In our experience, there are quite a few of these ads circulating in print publications and online, and as such, the Federal Trade Commission (FTC) has long issued a warning for consumers to be keen-eyed regarding these matters. Link to FTC credit card scam info page
These 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.
Also, if you’re considering a secured card as a way 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
; they collect information reported to them by banks, mortgage companies, department stores, and other creditors. If your card issuer doesn’t report to a bureau, the card won’t do you any good since it won’t help you build a credit history.
Report deceptive credit card ads
ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network
, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.