Secured Credit Card Marketing Scams

April 6, 2012
If your credit history is less than perfect or you have no credit history at all, you may be considering applying for a secured credit card. The ads for these types of credit cards are everywhere- on the internet, in mailings, and in newspapers. Perhaps you have seen this example:




Separated? Divorced? Widowed? Bankrupt?


Call 900-555-1111

You deserve to get credit! Call NOW!

It doesn’t matter if you’ve been refused credit before.

You owe it to yourself and your family so call NOW!

Your major credit card is waiting so don’t delay!

All of these claims and promises can be very tempting if you are struggling with debt, have bad or no credit, or have recently gone through a bankruptcy. The fact is that secured credit cards can be a very effective method of building a good credit history or re-establishing your credit history after you have experienced serious financial problems. But as a consumer, you need to be cautious. Some secured credit card marketers make deceptive claims in their advertisements merely to get you to respond to the ads. The following information should help you recognize the signs of possible credit card scams so that you can avoid being a victim of one of these unscrupulous financial schemes.

Secured vs. Unsecured Cards
Both secured and unsecured credit cards can be used to pay for most goods and services. The difference is that a secured card requires you to open and maintain a savings account which is used as security against your credit limit. An unsecured credit card does not require this.

Every financial institution has different rules and regulations regarding secured credit cards. The required savings account can range from a few hundred dollars to several thousand dollars, depending on your credit limit. Generally your credit line is 50%-100% of your savings account. Sometimes a bank will pay interest on the funds in your savings account. You should be aware that many times you are obligated to pay application and processing fees. These can sometimes total several hundred dollars. It is important to ask what fees you will be charged before you apply for a secured card. Also find out if the application and/or processing fee will be refunded if you are denied a card. You can expect to pay an annual fee and a higher interest rate for a secured credit card.

Deceptive Ads and Scams
The Federal Trade Commission is the government agency which oversees deceptive advertising in television, newspapers and postcards. This includes companies which offer major credit cards to consumers. These advertisements may be for secured credit cards, unsecured credit cards, or may not specify the type of card whatsoever. The wording in these ads suggests that all you have to do is call the listed number and you will receive a credit card. The number given may not even be toll-free. A “900” number service, for example, charges you for the call. You may be asked to provide your name and address to even receive the credit card application or to receive a list of banks which offer secure cards. You might be asked to call another “900” number for more information. This call will result in yet another charge to you.

Many times, deceptive advertisements omit critical information. For example, there will be no mention of:
  • Eligibility requirements, such as age or income
  • The cost of the “900” call (anywhere from $2- $50 or more)
  • The required security deposit (savings account)
  • Application and processing fees
  • An annual fee
  • The fact that the interest rate will be higher than average on any outstanding balance
How to Avoid the Scam
By knowing what to look for, you can avoid being victimized by credit card companies which use deceptive and misleading advertisements. The following signs should send up a “red flag” and signal you to be extremely wary of the advertisements and offers:
  • Any advertisement which asks you to call a “900” number for a credit card. A “900” number is not toll-free and you may never receive a credit card.
  • Offers which lure you with claims of “easy credit”. Any legitimate credit card provider will check your credit report before deciding whether to give you a card. Especially in today’s climate of tightening credit requirements, there really is no such thing as “easy credit”.
  • Credit cards which are offered by “credit clinics” or “credit repair” businesses. Many times these companies also will offer to clean up your credit history for a certain fee. IMPORTANT: you can correct actual mistakes or outdated information on your credit report yourself. No one can have information removed if it is genuine. Your creditworthiness can only be restored by maintaining good credit habits going forward- and that takes time.
Credit Reporting
If you are looking for ways to build or re-establish your credit, a secured credit card from a legitimate financial institution can be a positive step. You need to be certain that the card issuer reports your payment history (each month) to one or all of the major credit reporting bureaus. The three major bureaus are TransUnion, Equifax, and Experian. These companies collect information sent to them from banks, mortgage companies, credit card companies, department stores and most other creditors. If your secured credit card issuer does not report your information to a credit bureau, having the card won’t help you improve your credit.

For More Information
There are many ways to build a credit record. If you have an account at a bank or credit union, consider applying for a small loan. If there is a local store where you frequently shop, check to see if it offers a credit card with a small line of credit. Before applying for any new credit, be sure to ask if the business or financial institution regularly reports your payment history to the credit bureaus. If they do and you make consistent, on-time payments, you will start to build a solid credit history.

If you find that you cannot get credit on your own, you might consider asking a friend or relative who has a good credit history to co-sign for you on the loan or credit application. The co-signer assumes responsibility for the debt if you default on the payments. This is a serious request so be certain you can afford to repay the loan yourself before asking someone to do this.

If you are having problems paying your bills everything month, there are reputable credit counseling services which are available in most areas. Every state has non-profit organizations whose only purpose is to counsel consumers who are in debt. These organizations offer a wide variety of services which can include arranging a repayment plan that is acceptable to you and your creditors or something as simple as helping you set up a realistic budget. These counseling services are generally available to you at little or no cost. Check the White Pages of your telephone directory or the internet for an office near you.

Where To Complain
The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers recognize, stop and avoid them. To file a complaint or get free information on consumer issues, visit or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a video, How to File a Complaint, at to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.