Educational Consumer Tips

Credit Card Promotions

Author: Better Business Bureau

Have you seen an ad promising Instant Credit or a guaranteed
credit card even if you have bad credit, no credit, low income,
or similar? The BBB suggests you read any literature carefully
before sending any money. Make sure there is a phone number you can call to ask questions. If it is a sincere offer of credit,
federal law requires certain basic information to be disclosed
including the annual percentage rate, method of repayment, etc.
The BBB offers a free tips booklet on the Credit Practices Rule
which may help you in your decision.

Some financial institutions offer a "secured" credit card,
which allows you to open a savings account with that institution
and borrow your own money while you establish your credit
worthiness. There are a variety of sales organizations
operating who charge the consumer an up-front fee to find these
institutions, and they will normally not refund that fee if your
application is denied by the institution. These companies do
not issue credit, only match up consumers wanting the credit
cards with institutions providing the credit. If approved for a
secured credit card, you will be expected to deposit money in a
savings account and the amount that you deposit will be the
credit limit on your new card. Consumers should be aware that
before you can withdraw any money from your savings account, or
close it, you will need to pay off the entire balance on that
secured credit card. If you close your savings account, your
credit card will be invalid.

Some companies offer an in-house merchant card which has a
credit limit similar to a credit card, but which can only be
used for the merchandise that the company sells. Many of these
types of companies have also been known to use outside sales
organizations to find buyers for their products. The BBB has
seen many ads for these types of cards which appear to be offers
for major credit cards and the only way you can tell that they
are not is to read the literature very carefully.

If you would like information on a specific company offering
credit cards, call the BBB to obtain a reliability report. You
may also obtain a BBB list of organizations in your area
offering free advice and counseling on consumer credit. In
addition, the BBB offers free TIPS booklets on credit related