If you are a member of the unfortunate group of people who have less than perfect credit, or poor credit, you know how tough it is to get approved for any kind of a normal credit card. Many times the credit card offers you do receive are disguised as being legitimate when in actuality they are a rip-off. They offer inflated fees, astronomical interest rates and ridiculous terms. These companies target consumers with poor credit who are trying their best to rebuild it and take advantage of their situations. Let's take a closer look at one such credit card offer that is going around these days.
There are several different credit card companies that send out pre-approved credit card offers disguised as legitimate Visa or MasterCards, when really they are credit cards for store clubs or catalog clubs. The offer tells you that you are pre-approved for a credit line of up to $5,000 with no security deposit. They make you believe you'll be rebuilding your credit and enjoying the convenience of having a credit card in your wallet.
It sounds so good doesn't it? Your desperate for a credit card and this wonderful offer comes in the mail. I get these myself, but let's take a closer look at the fine print and what this is really about. Here is a typical headline in the letter you get. "Congratulations! You have been pre-approved for a Visa card with a $5,000 credit limit!" It goes on to say that all you need to do to activate your card is to verify your personal information, sign it and send back the pre-approved application. Your new card will be sent immediately.
If you continue reading the entire document you will find that this isn't a regular Visa credit card. It will only allow you to make purchases with the credit card in their special "store" or "online catalog". You can't use it anywhere else. The products usually consist of non name brand items like electronics and house ware products.
A little further down the letter it states that in order to activate your new credit card you'll need to send in a check or money order for $299.00 to cover the activation or new account fee. Of course you'll immediately get a discount on your first purchase. Some companies will also charge an annual fee of another $100-$200 on top of the activation fee. It's not beginning to sound like such a great offer now is it?
This is just one example of many that are sent out to unsuspecting consumers in the mail every day. Here are just a few things to watch for with any credit card offer:
- You can only use the new credit card to make purchases through the company's online catalog or store. The items are priced much higher than you can purchase them elsewhere. You're trapped into using the card for these purchases only. - The credit card has ridiculously high fees, such as hundreds of dollars of an activation fee, joining fee, annual fee, or monthly account fees. These fees are how the credit card company makes its money off the backs of consumers who are desperately trying to rebuild their credit. - High interest rates. Credit cards from companies like this can often have APR's of anywhere from 25% all the way up to 45% or more. You have to read the fine print and keep this in mind.
The best thing you can do with an offer like this is to take it and throw it in the trash. Take the $250 you would spend to open an account with one of these credit cards and spend it on a secured credit card instead. You can easily get a Visa or MasterCard with a security deposit. These companies report your payments to all the major credit bureaus each month and before you know it you'll be on your way to rebuilding your credit. Keep this in mind the next time you receive one of these fantastic new credit card offers in your mailbox.
I sit at my desk completely frustrated with Advanta. I opened up a business credit card with them 3 years ago and made a purchase of $6500 to help build my business credit for Rapid Recovery Solution, my Collection Agency. I have paid more then the minimum every month, on time. November 2008 I noticed that my interest rate seemed a little high. No where on my statement did it say the actual interest rate so I called the company. After 10 min or so I get a live rep on the line and they tell me it is 36.1%. Are they kidding, this must be a mistake. I have over a 750 score and never missed a payment. They said they sent me a notice in Aug that they are doing this due to a change in there lending methods. It turns out this is the second time this year they did this. I went from 8.99% in Jan 08 to 18.99 in Feb 08 to 36.1% in Aug 08. Now, being in the industry for over 10 years I know that I need to watch my credit. I look for charges I didn't make and it is tough to scam me. I have seen it all but this takes the cake. They told me I am now at a high risk for default so that is why they raised my interest rate? That doesn't make any sense. They should lower my rate if they think I will default on my credit card. How will an increase in what you are charging me keep me from defaulting. Luckily, I have the ability to pay off this card today but I want everyone to realize that these companies have you by the short-n-curly's. Watch your statements and lookout for this scam. FYI, In NY, the maximum interest rate is 30%. They are charging me more then the maximum allowed in my state. I will send a letter to the BBB, the NY Attorney General, the UT Attorney General and the Department of Consumer Affairs. As a nation we are in deep trouble. If a credit card company can just raise my rate because they feel like it I am positive that 99% of their customers are also paying 36.1%. How many other credit card companies are doing this to innocent people? We need to fight back. I am going to tell as many people as I can. Unfortunately, there is nothing we can do except payoff the card. I was told I am a high credit risk. I paid the bill in full after I realized the rate was so high and the next month I received another bill for more finance charges for about $255. I paid that bill in full. I just received another bill in the mail for $5.65 and my rate was changed to 37.99%. Another point higher. Just for a laugh I called again to see why the rate went up again and they said "Sir, you have been classified as a very high credit risk and as a company we can't risk you not paying your bill with us." I said "I just paid my bill in full with your company, I have never had a late payment with your company in three years, I have one mortgage on my house for $290K, 25 years left at a fixed rate of 5.375% and it is worth over $500k and almost zero credit card debt personally. I am in the fastest growing industry right now, CNBC expects the debt collection industry to grow at 25% a year for the next decade. What else would I have to do to receive a better rate?" The extremely rude lady said "Sir, you would need to send a letter to Santa Clause and maybe he can help you out." The Government should put a maximum rate in place for the next year or so on all credit card debt. If the credit card companies are truly worried about consumers defaulting on their obligations, wouldn't it make more sense to lower the rate so we can continue to make the payments? By raising the rate, it only makes it harder to pay and more likely that a consumer will default. The credit card companies are preying on the weak right now hoping you don't pay so they can pound you with the highest interest rate. When you do default, they now have a higher balance to sell to a collection agency. In my eyes, this is a crime. The Government doesn't care either. Instead of giving the banks 350 billion dollars, They could have sent $1151.98 to each US citizen to pay towards credit card debt. The banks still get the money but we the people get a little break on our bill. The average family of four would receive $4607.92 to pay off a credit card. They reason that the banks need the money so they can lend money again to us? Are they crazy? All the banks did was raise the interest rates on our cards and pocket the money without ever having to say what the money went towards. No accountability! Now the geniuses in Washington are considering giving billions to the auto industry so they can produce more shit cars that we can't afford. How about giving the money to everybody with a current auto loan so we can pay for the car we already have. The money would still flow to the banks and auto makers via we the people. Good luck America, your gonna need a miracle. I feel better now. I was very upset prior to writing this blog. I hope everybody reading this realizes that if it can happen to me it can happen to anybody. John Monderine Rapid Recovery Solution, Inc.
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