credit cards

A real 'gold' card

Monday, March 15
Posted: 11 a.m.

Coming soon: a new secured credit card that isn't backed by cash. To fund the Gold Bullion Card, you deposit gold coins. You can send in your own, or buy some from the card provider after account opening.

When I first read about the new "gold" card as reported by CNN, it immediately made me wonder why anyone would want such a card. What's wrong with a traditional secured card?

On Friday, I caught up with Jeff Silver, vice president of Gold Solutions Marketing, Inc., the Florida-based company behind the card, to get more details.

The details turned out to be thin, as his company is still working out who the issuing bank will be. The launch is slated for the second or third quarter of 2010.

Gold-backed versus green-backed cards

With a regular secured card, the dollar amount of the deposit determines the credit limit. With the Gold Bullion Card, the customer receives a credit limit based on 75 percent of the value of the gold coins at the time of deposit. Consumers can submit a variety of coins, including American Eagles, Austrian Philharmonics and South African Krugerrands.

Silver says a minimum deposit hasn't been established yet, but estimates that it will be "in the vicinity of $1,000, which is about one ounce right now."

The credit limit would fluctuate with the price of the gold, and the risk tolerance of the issuing bank. If the value of the gold on deposit dipped, the credit limit might not budge. Credit limits would be evaluated on a periodic basis.

Traditional secured cards usually require a minimum deposit of a few hundred dollars. In many cases, the consumer can qualify for an upgrade to an unsecured account and a refund of the deposit after a year or so of on-time payments.

Secured cards usually charge annual fees, but the Gold Bullion Card will have multiple fees. Silver says the card will have an annual fee in the range of $50 to $100, and a storage fee for the coins on deposit. A transaction fee will apply if the customer purchases additional gold coins.

Aside from the benefit of having a secured card that doesn't cost any cash, the card user retains ownership of the gold coins and can sell some of the coins at anytime. Selling off coins decreases the credit limit, though.

Consumers that later close the account can get a check for the value of the gold, or get the coins returned.

"What we do is we provide a vehicle where those coin holders can continue to be gold owners," says Silver. "But in addition they're going to be able to get a current or a present benefit. That present benefit is a low-APR credit line, using that gold as collateral."

The interest rate will likely range from 8 percent to 13 percent, according to Silver.

Who could use this card?

If you don't want to fork over cash for a traditional secured card, need a credit card and have some gold coins sitting around, this card could make sense. It would help you build credit and provide a credit limit you could literally sell.

The fees on the card are higher than on some secured cards. You also wouldn't be able to qualify for an unsecured Gold Bullion Card at a later date, as you can with other secured cards.

If you have good credit, then an unsecured card probably makes more sense. Unsecured cards don't tie any money up (gold or green) in a collateral account.

That's my take. What do you think of gold-backed credit cards?

Check the card out at Thegoldbullioncard.com.

Questions? Comments? E-mail plastic_rap@bankrate.com.

Follow me on Twitter.

Read all of the Plastic Rap blog posts.

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