Now I know banks obviously have their best interest at heart and not always their customers, but they have come up with some pretty clever programs to bring home even more bacon. I had someone email me a while back asking for ways they can try and rebuild their credit, when no one will lend them money.
One of my suggestions to them: Attempt to obtain a secured credit card. If you don’t know what a secured credit card is, I’ll break it down for you. The bank looks at you and decides you are way to unreliable to give a normal credit card to. They say “Hey give us $500 and we will give you a quasi-credit card with a $500 limit.” Essentially they allow you to borrow your own money from them. If you use the card for small purchases, and make your minimum payments (or pay the balance in full) each month, then the bank will eventually feel comfortable lending you some of their money. Soon enough you will be able to sign up credit card, bank loans, car loans, and any other kind of debt you want (although I’ll punch you in the face if you take advantage of all this credit).
If you think that a secured credit card is a good option for you, you might want to check yourself before you wreck yourself…here’s why. If you miss a payment, or are late, the bank still is going to charge you interest and fees. That’s right. They charge the crap out of you for using your own money. Here’s how it works….
You give them $500, they give you a secured credit card
You use $100 at the grocery store, and make a payment of $50 at months end.
The bank now charges you $15 in interest for borrowing your own money.
Booya, score one for the banks! I don’t think people that have secured credit cards realize they get virtually no benefits of an actual credit card, but could end up getting charged a ton for using their own money. The secured credit card does have a benefit; improving your credit score if you’re a responsible borrower, but for the irresponsible you’d be better off smoking dope laced with mushrooms that were dipped in black tar.