FTC Facts …

 FTC Facts                                                                   Federal Trade Commission

  For Consumers
October 1996
                                                                             For The Consumer


                                                                             www.ftc.gov      1-877-ftc-help


Secured Credit Card Marketing Scams
A    ds like this may appeal to you if you have
     a poor credit history or no credit at all.
Beware: while secured credit cards can be an
                                                      ANYONE CAN QUALIFY FOR
                                                       A MAJOR CREDIT CARD!
effective way to build or re-establish your credit
history, some marketers of secured cards make         Separated? Divorced? Bankrupt? Widowed?
deceptive advertising claims to entice you to
respond to their ads.
                                                              BAD CREDIT? NO CREDIT?
Secured vs.                                                        NO PROBLEM!
Unsecured Cards
Secured and unsecured cards can be used to pay                          900-555-1111
for goods and services. However, a secured card          Make the call NOW and get the credit you deserve!
requires you to open and maintain a savings              Even if you've been turned down before, you owe it
account as security for your line of credit; an
                                                         to yourself and your family.
unsecured card does not.                                 Your major credit card is waiting.
    The required savings deposit for a secured
card may range from a few hundred to several
thousand dollars. Your credit line is a percentage of    cards, secured credit cards, or not specify a card type.
your deposit, typically 50 to 100 percent. Usually, a    The ads usually lead you to believe you can get a card
bank will pay interest on your deposit. In addition,     simply by calling the number listed. Sometimes the
you also may have to pay application and processing      number is not toll-free. A `900' number service, for
fees--sometimes totaling hundreds of dollars. Before     which you are billed just for making the call, may
you apply, be sure to ask what the total fees are and    instruct you to give your name and address to receive
whether they will be refunded if you're denied a card.   a credit application, or give you a list of banks
Typically, a secured card requires an annual fee and     offering secured cards. It also may tell you to call
has a higher interest rate than an unsecured card.       another `900' number--at an additional charge--for
                                                         more information.
                                                             Deceptive ads often leave out important
Deceptive Ads and Scams                                  information.
The Federal Trade Commission (FTC) has taken                The cost of the `900' call--which can range from
action against companies that deceptively advertise           $2 to $50 or more;
major credit cards through television, newspapers,          The required security deposit, application, and
and postcards. The ads may offer unsecured credit             processing fees;
2 FTC Facts For Consumers

  Eligibility requirements like income or age;               to a credit bureau. If they do--and if you pay back
  An annual fee or the fact that the secured card            your debts regularly--you will build a good credit
  has a higher than average interest rate on any             history.
  balance.                                                        If you cannot get credit on your own, you can
                                                             ask a relative or friend with a good credit history to
How to Avoid the Scam                                        act as your cosigner. The cosigner promises to repay
To avoid being victimized, look for the following            the debt if you don't.
signs:                                                            If you're having problems paying bills, you may
   Offers of easy credit. No one can guarantee to            want to contact a credit counseling service. Non-
    get you credit. Before deciding whether to give          profit organizations in every state counsel consumers
    you a credit card, legitimate credit providers           who are in debt. Counselors try to arrange a
    examine your credit report.                              repayment plan that is acceptable to you and your
   A call to a `900' number for a credit card. You           creditors. They also can help you set up a realistic
    pay for calls with a `900' prefix--and you may           budget. These counseling services are offered at little
    never receive a credit card.                             or no cost to consumers. You can find the office
   Credit cards offered by "credit repair" companies         nearest you by checking the White Pages of your
    or "credit clinics." These businesses also may           telephone directory.
    offer to clean-up your credit history for a fee.              Sometimes, non-profit counseling programs
    However, you can correct genuine mistakes or             are operated by universities, military bases, credit
    outdated information yourself by contacting              unions, and housing authorities. They are likely to
    credit bureaus directly. Remember that only time         charge little or nothing for their services. Or you can
    and good credit habits will restore your credit          check with your local bank or consumer protection
    worthiness.                                              office to see if it has a list of reputable low-cost
                                                             financial counseling services.
Credit Reporting
If you're considering a secured card as a way to             Where To Complain
build or re-establish a credit record, make sure             The FTC works for the consumer to prevent
the issuer reports to a credit bureau. Your credit           fraudulent, deceptive and unfair business practices
history is maintained by companies called credit             in the marketplace and to provide information
bureaus; they collect information reported to them           to help consumers spot, stop and avoid them.
by banks, mortgage companies, department stores,             To file a complaint or to get free information on
and other creditors. If your card issuer doesn't report      consumer issues, visit ftc.gov or call toll-free, 1-877-
to a bureau, the card won't help you build a credit          FTC-HELP (1-877-382-4357); TTY: 1-866-653-
history.                                                     4261. The FTC enters Internet, telemarketing,
                                                             identity theft and other fraud-related complaints
For More Information                                         into Consumer Sentinel, a secure, online database
To build a credit record, you may want to apply for a        available to hundreds of civil and criminal law
charge card or a small loan at a local store or lending      enforcement agencies in the U.S. and abroad.
institution. Ask if the creditor reports transactions


                                                Federal Trade Commission
                                             Bureau of Consumer Protection
                                       Office of Consumer and Business Education

                            For The Consumer                 Federal Trade Commission
                                 www.ftc.gov                 1-877-ftc-help