Tidbits® - May 2008

Credit insight from Credit.com

Welcome to the Credit.com newsletter!

In this issue, we're explaining the features of secured credit cards and pre-paid cards. Also, common credit myths, how to manage an old collection account and unsecured subprime credit cards.

We'd love to hear from you! Send an email with your questions or comments to tidbits@credit.com anytime!

Quick Tip

If you have credit problems, a secured card is a great place to start. But there are also unsecured credit cards available for people with bad credit.

Credit cards offers for problem credit include the Credit One Bank Platinum Visa Card:
http://www.credit.com/r/credit-one-bank-visa-platinum-card
and the Tribute Gold MasterCard:
http://www.credit.com/r/Tribute-Gold-MasterCard

Be aware that these kinds of subprime credit card often come with higher rates and fees to offset the credit risk.

Browse unsecured cards for bad credit: http://www.credit.com/r/card_subprime

Secured credit cards? Pre-paid cards? Get the facts!

If you're working to rebuild your credit, you've probably heard of at least one of these types of accounts. Working on the outskirts of the credit card industry, they each serve a distinct purpose. They're wildly different and they can be complicated. For this month's newsletter, we're giving you the inside scoop on secured credit cards and pre-paid cards.

Secured Credit Cards

A qualifying family of four would get $1,800 with those rebates and could be looking at $4,000 in the bank by the end of May.

About the Economic Stimulus Rebates

What is a secured credit card?
A secured credit card is an account that you set up with a savings deposit as collateral for the credit limit. Secured credit cards are easier to obtain than standard credit accounts and are helpful for borrowers with poor credit or no credit.
http://www.credit.com/r/card_secure

How does it work?
Find a secured card offer online and submit your application. Approval isn't based on credit, so it's easy to get the card. You have to start with a cash deposit of at least $300. If you deposit $500 into a savings account, you'll have a $500 credit limit on your new credit card. When you make a charge, the amount is carried like a traditional credit card. Your deposit isn't touched.

You can use the card just like a traditional Visa or MasterCard credit card. On the basis of this account, the card company will report your payments and other activity to the credit bureaus each month. When you close the account or it converts to an unsecured account, you'll get your cash deposit back plus interest.

Perks

  • Approval regardless of credit
  • Works like a credit card
  • Reports to the credit bureaus
  • Reasonable fees and rates
  • Flexible repayment terms
  • You set your own credit limit

Downsides

  • You have to have at least $300 as a starting deposit
  • Not quite as good for your credit as an unsecured credit card

Pre-paid Cards

What is a pre-paid card?
Pre-paid cards or debit cards are often grouped in with secured and unsecured credit cards. But these pre-paid accounts are not credit cards, they are not reported to the credit bureaus, and they don't help rebuild credit. They largely serve the unbanked and allow direct deposit onto a debit card in exchange for expensive fees.
http://www.credit.com/r/prepaid_cards

How does it work?
Find a pre-paid offer online and submit your application. Again, it is easy to get approved since there isn't a real credit check. Usually, you set up your paycheck with direct deposit to the new account. You can also make single deposits by cash or transfer. The cards work like a standard ATM card with a Visa or MasterCard logo. When you make a charge, the amount automatically comes out of your account.

Perks

  • Easy approval
  • Looks like a credit card
  • Use at ATMs, online retailers and more
  • More flexible and secure than cash
  • Doesn't require you to have a checking account

Downsides

  • Doesn't report to the credit bureaus
  • Some accounts come with expensive fees

Which one should I get?

It depends on your situation. If you have credit issues and are trying to rebuild, go for the secured credit card. We recommend the Bank of America Secured Visa Card. It is an affordable account with some great built in perks. After 12 months of responsible use, the bank will match your deposit to double your credit limit.
Apply here - http://www.credit.com/r/ba-Secured-Visa-Platinum

If you don't have a bank account and need a way to manage your money, consider a pre-paid card. The Bank Freedom Prepaid MasterCard is one of the most affordable pre-paid cards on the market. Apply here -
http://www.credit.com/r/Bank-Freedom-Prepaid-MasterCard

Ask John

Myths about credit scores are everywhere. In fact, you have probably heard these misconceptions from your own relatives and financial advisors.

John is debunking two new credit myths for this month's newsletter.

Does opting-out of credit card offers give you credit score points? Is better to carry a balance than to pay off your credit cards in full each month?

Get straight answers from our score expert:
http://www.credit.com/r/tidbits-vol32

On the Blog

Do you have collection accounts on your credit reports? If you're considering paying off these old debts, there are few things to consider first.

Paying off a collection debt doesn't help your credit score but it is a smart financial move. Read the best ways to repay an old collection account.

Read tips for dealing with collections:
http://www.creditbloggers.com/2008/04/reader-questi-2.html

Quote of the Month

"Spring is nature's way of saying, "Let's party!""
- Robin Williams

Tidbits® - May 2008

About this newsletter
This information has been compiled and provided by Credit.com as a service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.

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