Unsecured and Secured Credit Cards

What they do is charge very high interest rates and fees. Most of these cards are more like secured cards. Most of them don’t actually make you send cash in to them up front like a secured credit card, but they tack this hefty fee onto the balance before you even receive it. What this means is that if the company offers you a $300 credit limit, and they charge a $50 annual fee and a $200 participation fee, you would only have $50 in available credit when you receive the card. This is money that you never get back, which means that even if you eventually run the card up and don’t pay it, the company has already made a profit on you, provided that you have made payments before you run the balance up. The only ways these companies could really lose money is if you spent the $50 in available credit and then never made any payments at all.

These cards may seem like a great deal, because you’re getting one that reports on your credit report as an unsecured credit card, but the fees that you end up paying actually make them a pretty bad deal. You are much better off taking out a secured credit card at a major bank than you would be to take one of these bad credit cards.

The only real benefit to accepting one of these offers is if you truly cannot afford to put the minimum deposit into a secured credit card. Of course, if that is the case, you may not be able to make the payments on your unsecured card, either, so you might want to avoid credit altogether until your income is a bit higher.