Credit card owners, the merchants or banks; everybody needs to be sure that every transaction is secure. For merchants, credit card transactions are becoming more secure than any other form of payment because the transaction is made a few minutes after the account verification. The reverse part of this payment modality is the penalty that the merchant can receive when there too many transactions are cancelled.
A credit card is secured when there is a deposit in an account that belongs to the cardholder. The deposit must have 100% or even 200% of the total value of the desired credit. This means that if the card owner puts down $2000, he will receive a credit in the range of $1000 - $2000. Many credit card issuers are offering incentives on their secured cards portfolios; this fact leads to a required deposit significantly smaller that the credit limit. The percentage can be 10% of the credit limit. This kind of deposit is held in a savings account.
The purpose of this savings account is to recover the cardholder's payments when there is not enough left on the card to pay for a transaction. In this situation, the credit card issuer can recover the purchase's cost out of this savings deposit. Even if the purpose of the security account is to be able to recover the event of default by cardholder, the savings account will not be credited in the case of one or two payments. The savings deposit is usually used when the account is closed. It is used too if the client is requesting to close it or due to delinquency between 150 and 180 days. In this case, the account will accrue fees and interest and the resulting balance will be much higher than the actual credit. The total debit may exceed the deposit and the owner can have an additional debit.
The cardholder knows these conditions from the agreement, which he signs when the account is opened. Those protections are taken when the person who requires a credit card has a poor credit history. The secured credit cards are also used when someone wants to rebuild their credit. Popular credit card logos can be visible on the secured credit card. The services charges and fees for ordinary credit cards are cheaper than the services and fees for secured credit cards. People in special situations, such as people having a history of delinquency on debits or having no credit history, can find the secured credit cards more advantageous than the common ones.
The security deposit can even be an even less expensive solution than the cost of the unsecured credit cards. Many advertising spots are presenting the credit cards use as a way to enjoy the wonderful moments of its user's life. These are some famous credit card brands that provided worldwide acceptance and an attractive suite of offers. The credit cards design and logo are also really important. The credit cards inaugurate a new era in the electronic technology of payment.
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Ads like this may appeal to you if you have a poor credit history or no credit at all.
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.
How to Avoid the Scam
To avoid being victimized, look for the following signs:
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 report.
A call to a ?900? number for a credit card. You pay for calls with a ?900? prefix ? and you may never receive a credit card.
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.
Remember that only time and good credit habits will restore your credit worthiness.
Credit Reporting
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 help you build a credit history.
For More Information
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 if you pay back your debts regularly ? you will build a good credit history.
If you cannot get credit on your own, you can ask a relative or friend with a good credit history to act as your cosigner. The cosigner promises to repay the debt if you don't.
If you're having problems paying bills, you may want to contact a credit counseling service. Non-profit organizations in every state counsel consumers who are in debt. Counselors try to arrange a repayment plan that is acceptable to you and your creditors.
They also can help you set up a realistic budget. These counseling services are offered at little or no cost to consumers. You can find the office nearest you by checking the White Pages of your telephone directory.
Sometimes, non-profit counseling programs are operated by universities, military bases, credit unions, and housing authorities. They are likely to charge little or nothing for their services. Or you can check with your local bank or consumer protection office to see if it has a list of reputable low-cost financial counseling services.
Both Devin Gilliland & Lar are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.