| 10 questions before getting a secured
credit card |
| |
| The Federal
Trade Commission organized a crackdown on telemarketers illegally charging fees
that range from $25 to several hundred dollars in advance of receiving "guaranteed"
credit cards or loans. Consumers either got nothing or were just sent credit card
applications.
Gather plenty of information when you apply
for a card. In addition to such important items as the interest rates, fees and
the required deposit, you'll want to get answers to these questions:
Do you report to all three major credit bureaus?
The reason for having a secured card goes far beyond being able to buy CDs
online. It's a vehicle for building a good credit history. If the issuer doesn't
report, you've lost a major benefit. (Tip: If you start getting mailers offering
you unsecured cards after you've made several months of payments on time, you'll
know that the bank is reporting.) Ask if the issuer will flag the report to the
credit bureaus as a secured card. Consumer Action points out that such a flag
could be a deterrent to rebuilding credit. How
long does it take to qualify for an unsecured card?
The card issuer should want to keep you as a customer, so most will qualify
you for an unsecured card after a period of making all your payments on time.
The average is about a year. How much
interest will my deposit earn, and what kind of account does the deposit have
to be in?
Generally, you'll be getting
about what you'd get if you opened a savings account at your own bank. The deposit
options include a savings account, money market or certificate of deposit. Also,
ask how long the money has to stay on deposit after the account is closed. Some
banks will want to keep the deposit for a couple of billing cycles to cover any
stray charges that arrive. How can I
make the best use of a secured card to build my credit rating?
Buy a few things and pay off the card every month. "People should not get
these cards to carry any balance," Sherry says. "It seems you need to make a few
purchases and pay for them. It helps to pay in full every month to show you've
got this excellent credit rating." While secured
cards make sure you never spend more money than you can afford while they force
you to save, it's not a good idea to keep one any longer than you have to, experts
say. All secured cards have annual fees and higher
interest rates than regular, unsecured cards. If you have enough discipline to
use a secured card responsibly, you have enough to use an unsecured card and set
up a better savings program on your own. "We recommend
to people that it should be a stepping stone," Sherry says. Pat
Curry is a freelance writer based in Georgia. | 
