Credit Cards And Scams
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Understanding Credit Card Scams: How to Protect Yourself
Summary
Scammers are constantly devising new strategies to separate you from your hard-earned money. Here's what you need to know to protect yourself.Beware of Advance Fee Credit Cards
Some companies claim they can secure a credit card for you, regardless of your credit history. If you pay the typical $200 or more they ask for, here’s what might happen:
- You receive a card only redeemable for overpriced items from their catalog.
- You get applications for secured credit cards, which require a $500 deposit for a $500 credit limit.
- You receive nothing at all.
Legitimate secured credit cards from reputable banks or credit unions can help rebuild your credit. Many offer them without upfront fees. To get one, simply apply at your bank or credit union.
Watch out for cards with a low credit limit, like $300. Banks offering these may impose fees such as application, processing, and annual fees, plus a high-interest rate starting the day you open the account. These charges can consume up to 90% of your credit line! For a secured card, stick with your bank or credit union and avoid excessive fees.
The Truth About Instant Loan Checks
Instant loan checks may appear in your mailbox looking like genuine bank checks, but they are actually loans. Cashing one means agreeing to loan terms, including interest payments. Before signing, read the accompanying letter carefully to understand the terms, interest rates, and monthly costs.
These checks can be mistaken for reimbursements or benefits, but cashing them can trap you in high-interest loans. The lender's interest rate may be higher than advertised, and if you can't make payments, they might pressure you to take a new loan secured by your home.
Before cashing, ensure you know:
- Who sent the check and for what purpose?
- Understand the terms fully by reading the letter. If unclear, contact the sender for clarification.
- Destroy any unwanted checks to prevent misuse.
A Word on Credit Repair Companies
Credit repair companies that promise to boost your credit or secure loans with special methods don't possess any secret abilities that you don’t. Paying them only reduces your funds for settling existing debts.
Due to issues with credit repair firms, laws have been enacted to regulate their actions:
- They must provide a written contract with a five-day cancellation option.
- They can't demand payment in advance, and services must be completed within 90 days.
- They must register with the Department of Justice and file a $100,000 bond with the Secretary of State.
Unfortunately, few credit repair companies comply. Always handle credit improvement yourself to ensure your financial security.
By staying informed and cautious, you can protect yourself from these common scams and manage your credit responsibly.
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