March 3, 2017
Some of you might find this hard to believe, but there are “legitimate” financial institutions out there that will take advantage of you. Especially if you are down on your luck.
Reestablishing credit can be a very difficult process. One bad mark on your file can haunt you for years. Late payments usually fall off after 2 years. But most other negative marks will stay with you for up to 7 1/2 years. Judgments and liens can last up to 10 years. Yes, you can petition the major credit reporting agencies to remove inaccurate information. However that process can take nearly as long as the item might have remained on your report.
Here come the credit card companies to the rescue. They know that recent positive information can sometimes overcome dated negative information. Some of them want to help. Usually the best way to get back into things is a secured credit card. While the interest rates don’t tend to be attractive (±20-24%), that can be adjusted once you’re established with the quality lenders.
Discover It Card offers a secured card with no annual fee, a cash back option, and it offers many of the benefits of their unsecured cards. The downside is you have to deposit an amount equal to what you want your credit line to be (min. $200). After several months, the original amount will be returned to you if you’ve maintained the card in good standing. Plus, they will likely double your credit limit once it is converted to an unsecured card.
Bank of America offers a good solution as well. For a $99 deposit, BOA will issue a secured card with a $29 annual fee. They will set the credit limit based on your credit report. Like Discover, they will convert the card to unsecured after several months of good history, and likely double the limit once they do so.
Those are two examples of the good… but their are many out there that make predatory lending an art. They know there is a certain amount of desperation when it comes to rebuilding your life. And they are more than happy to take advantage of it.
Whenever you apply for a credit card, secured or otherwise, READ THE TERMS & CONDITIONS! Mind you, most any issuer stays within the federal government rules regarding consumer lending (http://www.consumerfinance.gov/learnmore/). But some skirt the very edges of those laws.
Matrix MasterCard (issued by Continental Finance) is a good example of an unsecured card you should avoid. With a variable interest rate of 30% or more (based on the prime rate, at this writing it’s listed at 30.49%), they also will hit you with a $125 annual fee for the first year ($96 per year thereafter), a $10 per month maintenance fee and the highest late/returned payment fees ($37) they are allowed.
While nothing here is great for a consumer, you definitely want to avoid any card with a month maintenance fee. You could have the card completely paid off and still end up paying them $10 per month just for the joy of doing business with them.
Total Visa (issued by Mid-America Bank & Trust Company), while not quite as bad as Matrix also has a tendency toward the “stay away” side of unsecured cards. Staying just below 30% interest (29.99% at this writing), they add on a “processing fee” of $89 and a first year annual fee of $75 ($48 each year thereafter). They are paying themselves $164 to open your account.
On the upside, they waive the monthly maintenance fee for the first year. Though you’ll be paying $6.25 per month from then on.
First Access Visa (unsecured) and First Progress MasterCard (secured) are both issued by the same company, Progress Credit.
The moral of the story is… know what you’re getting into.
Yes, Matrix MasterCard and Total Visa will likely approve you no matter what. But considering their processing fees and annual fees they are stacking the odds in their favor. Unless you pay nothing on the cards, they are making a significant amount from day one. They’ll say that it’s the price you have to pay to rebuild your credit. Though, if you add it all up, a secured card will do the same thing for you and cost much less in the long run.
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