HomeDebtBanks are geniuses!

Banks are geniuses!

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.

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  1. Dope with mushrooms dipped in black tar?! That's great awesome imagery…My husband had a sole-proprietor business go under in 2003 and declared bankruptcy over the business debts. He functioned without credit (or on my good credit I should say) for 5 years, but last year bit the bullet & got a secured BOAmerica credit card for $500. He put his cell bill on auto-pay, used our credit union's bill pay feature to automate the regular payment for that to the cc. Throughout the year he occassionally bought bigger ticket items and paid them off the next week. His credit score, which had been 550 in June 2008, is now 670 (verging on 'okay'). On/about the one year anniversary of having the card (this August), he called & requested an unsecured card – which they granted AND upped his credit limit to $1000. I thought it would take 6 to 8 weeks to get his 'security deposit' back, but it was in the mailbox 6 days later. So YES. Secured cards, used with UTMOST caution and responsibility, are a great tool for rehabbing poor credit.

  2. yeah, it sucks but it truly is one of the only/fastest ways to re-build or to start building your credit history if you can't get a loan/credit card any other way.

    Unfortunately, my boyfriend had to go this route. we'll be checking our credit scores this month b/c it was about a year ago that he got the card. Hopefully it will be high enough that he'll feel comfortable applying to remove the security.

    Another way to do this is RRSP loans. I recently learned that banks often require lower credit scores for these types of loans then others.

  3. Could we set this type of thing up? I would love to help someone's credit by charging them interest and taking no risk!

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