On the surface, a secured credit card or a prepaid credit card is fantastic - they offer a small scale manageable way for people to rebuild their credit score. They pay up front either as a balance for the card to draw from or to establish a line of credit - what isn't to like?
The credit card issues understand that people interested in secured or prepaid credit cards are in a time of need. Because of this, there are a number of secured credit card fees and hidden
But unfortunately, many of the secured credit card issuers take advantage of the cardholders looking to leverage their services. Because people are desperate to rebuild credit, to rent apartments or to take out mortgages, they often find themselves in a situation where they can get taken advantage of.
That’s why the Credit Authority team has teamed up to write this article - specifically to let you know about the dangers and benefits of using a secured credit card. With the knowledge in this article, you’ll be able to tell a secure credit card scammer from those who are really trying to help out the consumer.
#3 Extra High Credit Card Interest Rates
Many of these companies will offer cards on a variable interest rate according to your credit history. But most people applying for secured credit cards don't have significant credit histories, which means that their monthly interest rates for Secured Credit cards could be upwards of 30%. This is especially dangerous because it has the ability to compound month to month - meaning that $500 in debt could easily become $1000 in a very short period of time. When applying for a Secured Credit Card, make sure to note your interest rate!
#2 Monthly Credit Card Fees
Many credit cards in the Secured Credit card category will advertise no interest rates. They generally achieve this by placing a monthly maintenance fee on the card, which the cardholder will pay regardless of card usage. It is not unusual for these fees to be anywhere between $10 and $25 per month - which comes out to a very expensive annual fee with very little in the way of rewards! If you're planning on using a credit card to rebuild your credit, you shouldn't be paying any more than you have to.
#1 Interest Rates With No Grace Period
The extreme fees on secured credit cards and prepaid credit cards are well known - so some less scrupulous companies have created ways to get around this - by charge interest on every purchase cardholders make. This means that just for using the credit card, they'll charge 10% - on every single purchase! That $10 meal just became $11, and for people who are trying to get out of financial trouble with think this is a credit card scam. We would recommend looking out for cards advertising a low-fixed interest rate, as we put this practice almost on level with online payday loans or stealing credit card numbers.