Avoiding Credit Card Scams
If you are a first time credit card user or have had credit cards for years, it is important to know about possible scams that you can be exposed to. Although many credit card companies are perfectly honest, there are also many dishonest ones who want to rip you off. If you are unaware of the ways in which you can be conned or misled then you could end up losing a lot of money. Here are some of the worst credit card scams around and how to avoid them:
Debt suspension offers are sometimes offered by banks as a way to ‘help’ you keep on track with payments. The way debt suspension works is that you pay a certain amount each month so that if you cannot pay your bills then no interest will accrue during this time. Although this might seem like a good idea at first, the benefits are really quite minimal. You cannot use your card whilst you are out of work, and although no interest is being added, your payments are not being paid so once you can work again you still have the balance to pay. In essence you are paying money for something that will not really help you. If you are getting a credit card then make sure that this type of debt suspension offer is not included at a cost to you within your payments. If it is then get it removed and find an independent insurance policy that will help with your payments if you are unemployed.
One of the worst scams around is the advanced fees scam, which targets people are desperate to get hold of a card with good rates. The ‘lender’ will offer you a card at a great rate, but the catch is you have to pay them an administration or approval fee up front so that your application is processed. Once you have paid this fee then you probably will never hear from the company again. If you are ever offered a card but are asked to pay a fee upfront, just refuse. Even if you have poor credit you shouldn’t need to pay fees up front for cards. A lender should either accept or reject your application, and fees are not required.
One of the most common scams around is to add expensive credit protection to your card in case it is lost or stolen. The extra money you pay for this protection is usually very high, and often covers you for very little. If you report your card stolen immediately then it is unlikely that you will lose much, and other insurance policies or consumer laws often cover you already. If you really want protection then get a separate policy from an independent company that will work out a lot cheaper and will allow you to protect all your cards at once.
If you are getting a credit card, then remember to check and double-check all clauses within the agreement you are signing. If anything seems suspicious at all, then do not sign and find a different company. As long as you are aware of the dangers you will find a fair and honest credit card company who can give you great rates.
Bad Credit? Can't Get a Credit Card? Yes You Can!
Most people don't give much thought to the importance of credit until they need it. When they go to apply for a credit card they discover that their bad credit keeps them from getting a card, or a card at a decent rate. Most people want to pay their bills, and remain in good credit standing. Nobody wants to be seen as a deadbeat to the credit card companies, but because of a couple of tight financial situations in the past they cannot get approval for a credit card. There is a way around this problem.
There are a few companies out there that understand your situation, and want to help you to obtain a better credit rating. These companies offer secured credit cards. A secured credit card is a card that you make a deposit to which determines your credit limit. You can use your card just like any credit card, but your purchases are limited to your deposited amount, (similar to a debit card). Before applying for a secured credit card you must make sure that the card reports to the major credit reporting agencies. If they do not report then that card is nothing better than a glorified debit card. In extremely simplified terms when a secured card sends reports to the major credit reporting agencies they are showing that you are paying off your debits, and you are less of a credit risk.
Here's a brief example of how these cards really work. On the surface it works just like a debit card. Let's say you made a $200 deposit to your secured credit card. You then go to the store and make a $20 purchase. Your account balance is almost immediately reduced by $20 to $180. The key to these cards is when the credit card company goes to report your information to the major credit reporting agencies, (the better secured card companies will report monthly). In simplified terms, the credit card company will tell the reporting agency that you made a $20 purchase on your credit card, and it was paid. As far as the reporting agency is concerned you are making good on your charges. This is a sign of a good borrower. Even if you have had problems with credit in the past the reporting agency is seeing that you are now less of a default risk thus bumping up your credit score. After time you become more appealing to other credit card companies and you will more readily be accepted for traditional credit cards.
Improving your credit is not a quick and easy task. There are many other things that factor into your credit score, but this is one action that you can take on your own. A secured credit card may not fix severely damaged credit, but for many people it's a step in the right direction. It will not make your credit score sky rocket into the upper 700's either. It will take some time, but it's better than sitting back, passively hoping that things will get better.
*Before applying for any credit card be sure to read, and understand the 'terms and conditions' of the card.
Please visit PlasticMine.com for a selection of secured credit cards.