Facts for Consumers from the Federal Trade Commission

Secured Credit Card Marketing Scams -- September 1993

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ANYONE CAN QUALIFY FOR 
A  MAJOR CREDIT CARD!

Separated?  Divorced?  Bankrupt?  Widowed?   
BAD CREDIT?   NO CREDIT?   
NO PROBLEM!

Make the call NOW and get the credit you deserve!

Even if you've been turned down before,
you owe it to yourself and your family.

Your major credit card is waiting.
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If you have no credit or a poor credit history, this ad may 
appeal to you.  Before you respond, read this brochure.  Using a 
secured credit card can be an effective way to build or 
re-establish your credit history.  However, be aware that some 
marketers of secured credit cards make deceptive advertising 
claims to get you to respond to their ads.

This brochure explains the differences between a secured and 
unsecured credit card, describes how marketing scams are used to 
sell secured credit cards, and tells how to recognize and avoid 
deceptive credit card offers.  Some organizations that offer 
additional consumer credit information and assistance are listed 
at the end of this brochure.

Secured versus Unsecured Cards

Secured and unsecured credit cards work the same way; both can be 
used to pay for goods and services.  However, a secured card 
requires you to open and maintain a savings account as security 
for your line of credit; an unsecured card does not.
The savings account for a secured card may range from a few 
hundred to several thousand dollars.  Your credit line will be a 
percentage of your deposit, typically from 50 to 100 percent.  
Usually, a bank will pay interest on your deposit.
Also, you may have to pay application and processing fees that 
sometimes amount to hundreds of dollars.  Before you apply, be 
sure to ask what the total fees are and if they will be refunded 
if you are denied a card.

A secured credit card also typically requires an annual fee and 
has higher interest rates than unsecured cards.

Deceptive Ads and Scams

The Federal Trade Commission (FTC) has taken action against 
companies that deceptively advertise Visa and MasterCards through 
television, newspapers, and postcards.  The ads may offer 
unsecured credit cards, secured credit cards, or not specify a 
type of card.  The ads typically are phrased to make you believe 
you can get a credit card simply by calling a telephone number 
listed in the ad.  Sometimes the number is not toll-free.  A 
"900" number service, for which you will be billed just for 
making the call, may instruct you to give your name and address 
to receive a credit application, or it may give you a list of 
banks offering secured cards, or direct you to call another "900" 
number at an additional charge to get more information.
Be aware that deceptive ads often leave out important 
information.

l 	They often omit the cost of the "900" telephone call, which 
can range from $2 to $50, or more.

l 	The ads often do not mention a required security deposit, 
and application and processing fees for the secured card.

l 	The ads frequently fail to say anything about income and age 
requirements.

l 	The ads may not mention the annual fee for the secured card 
and a higher than average interest rate on any balance.

How to Avoid the Scam

To avoid being victimized by a secured credit card marketing 
scam, look for the following signals.

l 	Beware of offers of easy credit.  No one can guarantee to 
get you credit.  Before deciding whether to give you a credit 
card, legitimate credit providers examine your credit history 
through a credit report.

l 	Think twice before making a call to a "900" telephone number 
for a credit card.  Remember: you pay for calls with a "900" 
prefix and may never receive a credit card.

l 	Be wary of credit cards offered by "credit repair" companies 
or "credit clinics."  These businesses also may offer to clean-up 
your credit history for a fee.  However, you can correct genuine 
mistakes or outdated information yourself by contacting credit 
bureaus directly.  But remember, only time and good credit will 
repair your credit report if you have a poor credit history.

Credit Reporting

If you are considering a secured card as a means to build or 
re-establish a credit record, make sure the issuer reports to a 
credit bureau.  Your credit history is maintained by companies 
called credit bureaus that collect information reported to them 
by banks, mortgage companies, department stores, and other 
creditors.  If your card issuer does not report to a credit 
bureau, the card will not help you build a credit history.

For More Information and Assistance

l 	To build a credit record, you may want to apply for a charge 
card or a small loan at a local store or lending institution.  
Ask if the creditor reports transactions to a credit bureau.  If 
they do and you pay back your debts regularly, you will build a 
good credit history.

If you cannot get credit on your own, you also can ask a relative 
or friend with a good credit history to act as your co-signer.  
The cosigner must promise to repay the debt if you do not.

l 	If you are interested in applying for a secured credit card, 
the BankCard Holders of America (BHA) provides a list of 
institutions offering secured cards.  BHA's "Secured Card List" 
is free to BHA members, $4.00 for non-members.  Write to: 
	
	BankCard Holders of America 
	560 Herndon Parkway, Suite 120 
	Herndon, VA 22070.

l 	If you are having difficulty paying your bills, you may want 
to contact a Consumer Credit Counseling Service (CCCS).  This is 
a non-profit organization with more than 850 offices located in 
50 states that counsels heavily-indebted consumers.  Check the 
White Pages of your telephone directory to get the number for the 
CCCS office nearest you, or call 1-800-388-2227 using a 
touch-tone phone.  If you have other questions, write or call:

National Foundation for Consumer Credit
8611 Second Avenue, Suite 100
Silver Spring, MD 20910
(301) 589-5600

To learn more about credit issues, send for the free FTC 
brochures listed below.  Write to:  Public Reference, Federal 
Trade Commission, Washington, D.C. 20580.

Building a Better Credit Record
Choosing and Using Credit Cards
Cosigning a Loan
Credit Repair Scams
Fix Your Own Credit Problems
"Gold" and "Platinum" Cards
Solving Credit Problems
Using Plastic: A Young Adult's Guide to 		Credit 	Cards
"900" Numbers

For a complete list of consumer and business publications from 
the FTC, send for a free copy of Best Sellers at the address 
listed above.

Where To Complain

If you have problems or questions about a secured credit card 
marketer, contact your local consumer protection agency or state 
Attorney General's office.  You also may send your complaint to 
the FTC.  Write to: Correspondence Branch, Federal Trade 
Commission, Washington, D.C. 20580.  Although the Commission 
cannot resolve individual disputes, the information you provide 
may indicate a pattern of possible law violations requiring 
action by the Commission.