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Bad credit card deals
targeting those with bad credit
By Lucy
Lazarony • Bankrate.com
 Imagine
a credit card with fees as high the credit line, an eye-popping
annual percentage rate, no grace period and stiff late payment penalties.
 Now
imagine having bad credit
or no credit and believing this offer is the best you can get.
"Credit
is an important safety net. I would never deny that," said Linda
Sherry, editorial director for San Francisco-based Consumer
Action, a consumer advocacy group. "But if it costs you this
much, there has to be a better way to get it."
Experts
say many consumers with damaged and no credit are paying much more
than they have to for a credit card.
An expensive-looking
Future
Take
the Future Card, an unsecured credit card being marketed on the
Internet, offered by First Premier Bank, Sioux Falls, S.D. It carries
a 19.9 annual percentage rate; a $98 one-time program fee; a $70
set-up fee, and a $5 monthly participation fee. Customers end up
paying $228 in fees alone for a credit line that could be as low
as $250.
A whopping
percentage rate
Or
take an unsecured credit card from Cross Country Bank, Wilmington,
Del. It came with a whopping 20.99 annual percentage rate, no grace
period, a $50 annual fee and $100 application processing fee for
a credit line ranging from $350 to $5,000. In 2004, the Bureau of
Consumer Protection in Pennsylvania successfully sued the card issuer
for its practices and won restitution for some cardholders.
Experts
say those with bad credit would be much better off getting a secured
card than paying these types of fees. With a secured card, a consumer
would make say a $250 deposit and then receive a $250 credit limit,
sometimes higher.
High fees for
high-risk
customers
Miles
Beacom, president of First Premier Bankcard, said his customers
range from those with no credit to those with bruised and
very bad credit. The fees associated with the Future Card and other
unsecured credit cards are priced to compensate the bank for serving
customers who may be late with payments or who fail to make payments
at all.
"Our
preference would be to have these people obtain a secured card with
us," Beacom said. "But the majority of people who take this card
don't have the funds available or they don't want to put the funds
aside."
Options
for those with bad credit
Sherri
Goss, vice president of Consumer
Credit Counseling Service of Atlanta, said many consumers with
bad credit are unaware of their options.
"People
who do not understand how the credit system works fall prey to bad
deals," Goss said.
In
addition to high-fee unsecured cards, those with poor credit also
are bombarded with quick-fix credit repair offers that promise to
make all their credit problems disappear -- for a price.
Beware credit
repair scams
Credit
repair scams can be found almost everywhere in the mail, in newspapers
and magazines, tacked to telephone polls. They've even migrated
to the Internet. But experts warn there is no quick fix when it
comes to credit repair.
"The
main thing is there is no magic bullet for credit repair. You could
pay someone a million bucks and they wouldn't be able to fix your
credit," Sherry said.
Experts
say the first step to credit repair is for consumers to get copies
of their credit reports from the three national credit bureaus of
Experian, Equifax Credit Information Services Inc. and TransUnion
Corp. and check for errors and omissions. Everyone is entitled to
a free copy of their credit report from each of the bureaus annually.
Consumers can downloan them at www.annualcreditreport.com.
"If
you have bad credit the only way to make it better is to look at
your credit report and deal with it," Goss said. "If the information
is wrong, you need to dispute it. If it's right, you need to pay
it off."
Check
your credit report
To
request copies of credit reports consumers should contact:
-- Updated: Aug. 15, 2008
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