Action Line: Some secured credit cards OK
BY PHIL MULKINS World Action Line Editor
Sunday, December 11, 2011
12/11/11 at 3:55 AM
Dear Action Line: Do these "secured credit cards for rebuilding credit" plans actually work, or are they just another way for issuers to charge usurious rates? - L.T., Tulsa.
Non-profit consumer education group Consumer Action recently released results of its 2011 Secured Card Survey "of credit cards designed for those with damaged credit or no credit record." These offer participants "a road map for regaining the safety net that wisely used credit can provide," says the Consumer Action website.
See the survey of 13 card issuers' program cards, surveyed June through November, ranging from Applied Bank to Wells Fargo, at tulsaworld.com/CAsecuredcards Major banks surveyed include Bank of America, Capital One, Citibank, Navy Federal Credit Union and U.S. Bank.
The survey reveals rates and fees charged to secured cardholders vary dramatically card to card: 0 percent to 23.99 percent. While many of those surveyed secured cards had reasonable terms, CA's research found some cards have hidden fees in the fine print.
"Secured cards offer consumers, whose credit was harmed post-2008 by lost jobs and foreclosures, a way to re-establish healthy credit histories. For people who have little or no access to credit because of a poor payment history, a low-cost secured card can be a valuable tool to rebuild a credit score," the site reads.
Four surveyed issuers offered purchase rates below 1 percent (Navy Federal, Applied Bank, HSBC's Orchard Bank and USAA). Applied Bank charges no interest on purchases on its secured Platinum Visa but makes up for this with $9.95 monthly maintenance fees. Secured cards must be backed by deposited cardholder money: $200 to $500, in accounts held by issuers. Credit limits are the amounts deposited. Card activity is reported to the three national credit bureaus.
Even with money on deposit, surveyors found some people with blemished credit will not qualify for secured cards. Some cards are not available to the general public as they are offered by credit unions or banks serving specific clientele (military, regional populations, etc.). Following Applied Bank's zero-percent offer, the lowest interest rate on surveyed cards was HSBC's Orchard Bank with 7.90 percent and a $35 annual fee (waived the first year). The highest interest rate on surveyed cards was Fifth Third Bank's Secured MasterCard at 23.99 percent. The average interest rate on surveyed secured cards was 16.60 percent. Read the survey to find the most beneficial rates/fees combinations.
Cardholders who use secured cards as tools to rebuild stable credit records find themselves in positions to qualify for mainstream credit cards within 12 to 18 months. These cards are not meant for long-term relationships. Get in, pay on time, build or rebuild good credit and get out again when you qualify for unsecured deals. See FICO Corp's "Why is your FICO score so important to your financial health?" at tulsaworld.com/FICOwhyscorecounts
Original Print Headline: Some secured cards OK
Submit Action Line questions bycalling 918-699-8888, emailing phil.mulkins@tulsaworld.com or by mailing them to Tulsa World Action Line, P.O. Box 1770, Tulsa OK 74102-1770.
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