Secured Credit Cards

Don't Get Scammed When Rebuilding Your Credit History

By Dave Robinson

For people with a poor credit history or bad credit, getting approved for a credit card can be very difficult, if not impossible. The good news is there are a number of credit card options that are designed specifically for people who have bad credit and are trying to rebuild or repair it. There are also, sadly, a lot of scams to take advantage of the person trying to get a credit card when no one else will issue one. How do you tell which options are valid ones and which are just taking advantage of a bad situation? Lets take a look at some the things that you should be wary of below.

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Catalog Clubs Disguised As 'Credit Cards' For People With Bad Credit.
These supposed credit cards offer to help people rebuild their bad credit history by making purchases from their catalogs. Often the products in the catalogs are often overpriced, and most of the time you can't use the 'credit card' anywhere else. They will make reports to the credit bureau with your balance and payment history which will help to repair bad credit, but this can be a very expensive way to acquire goods and clear up your credit history.

Prepaid 'Credit Cards' To Help People Repair Bad Credit
Prepaid credit cards are not really credit cards. They may bear a Visa or MasterCard logo, but they're more like a debit card, without a bank account. The purchaser 'loads' the card with a deposit, usually with a minimum of $20 and a maximum of $500 to $5000. When you use the credit card to make a purchase, the amount of the purchase is deducted from your balance. When the balance reaches $0, you can't use the card until it is reloaded.

Additionally, they do not report to the credit bureau, so this will not help you rebuild your poor credit rating.

Secured Credit Card - This Is The Best Option For People With Bad Credit.
A secured credit card is one of the best options for people who have bad credit and can't get approved for a standard credit card. Your approval for a secured credit card is contingent upon a deposit in the credit card company's bank. Your initial credit limit is usually the amount of your deposit. And as you make your payments on time, the credit card company may actually increase your credit limit to 150% or 200% of your security deposit.

Unlike a prepaid card, where you are actually spending your own money when you make a purchase, with a secured credit card you are truly buying on credit and reestablishing your credit history. The security deposit is only touched if you default on payments. Before you sign up for a secured credit card, shop around, because interest rates will vary.

There are many options to choose from as you are trying to rebuild your credit history. Unfortunately, many unscrupulous people have found ways to take advantage of people who are tying to turn over a new credit leaf. Dont let that happen to you! Thoroughly research each of your options before making a decision.

If you would like to get more credit information you can visit our website which contains many credit resources.

This article is copyright 2005, but can be freely reprinted, as long as no changes are made, including hyperlinks.