In an earlier thread I discussed the likelihood of me travelling without a credit card (since my poor credit has made getting one rather unlikely). Some contributors to the thread suggested a secured card.
I’m slightly confused on a couple of points. Suppose Cecil Adams Bank & Trust issues me a secured Visa, and I deposit $1,000 into a security account, thereby giving myself a $1,000 line of credit. Now, if I buy $900 worth of goods on the card, can I just tell the bank to take the money out of my secured account, leaving me with a $100 line of credit?
If I can’t do this, then am I considered in default for not actually paying the bill? Would I get my remaining $100 back? Would my credit be further damaged?
Along these same lines, does anybody know of a bank or service that issues pre-paid (as opposed to secured) credit cards that can be used in exactly the way I just described?
I’ve seen ads for a Capital One secured credit cards where you deposit $99 and you get a $500 credit line. I’m not an expert on secured credit cards, but from what I understand you pay the bill off like you would a normal credit card. If you keep a good history with it they will offer you an unsecured one.
Nope. Read the fine print. By having a secured card, it means you are on probation. For one reason or another your credit isn’t good enough to establish a “normal” credit card.
Chances are, if you rack up $900 in bills, then tell the issuing agency to take it out of your secured account, you are effectively defaulting. You will probably kill your chances for any type of credit for quite a while, and/or a much higher interest rate if you attempt a car loan or mortgage (if you qualify at all!)
In short, if you fail at probation this means you are untrustworthy with credit.
I got a secured credit card when I got out of college, to start building a credit record. I gave the bank $500, which they put into a 4% CD for two years. The card is like any other credit card in that I get a bill every month that has to be paid. After the two years is up, I get my money back, with interest, and I can get a better credit card because I’ve improved my record. I imagine that this is pretty standard procedure for secured cards.
I thought that a secured credit-card had a limit equal to the amout of the security. Is this not always the case?
That pre-paid card would be a damn good idea, IMHO. We need a debit card or prepaid card that can be used through credit-card mechanisms. There are just too many uses for a credit-card these days as a payment meduim, not as credit, per se.
I had a secured card from Wells Fargo about a year ago, with a $300 deposit. When I wanted to cancel the card, I still had a balance of $50 or so, so they took that out of my deposit and sent me a check for the remaining $250.
I doubt you could do that without canceling the card, though.
BTW Sunspace, debit cards with a Visa or MasterCard logo can be used anywhere you can use a credit card. Sometimes you have the option of putting it through as a credit transaction (which you have to sign for) or an ATM transaction (which you have to give your PIN for).
Every bank here seems to be giving them out, do you not have them in Canada?
There was also a prepaid card called Visa Buxx… I’m not sure if they’re still issuing those.
Hmmm… AAA here in Michigan has started doing this! I don’t know if it’s just AAA-Michigan, or AAA nation-wide, or if even CAA is affiliated enough with AAA to think about participating, too.
AAA is the auto club everyone knows of. They’ve recently changed all of our membership numbers to have a full 16-digits, and put on a magnetic strip, and they all begin with 4 which means either Visa or MasterCard. You can go to any AAA Office to “load” the card with a cash or a check, or do it by credit card over the phone or their website (I think the website will).
Then, the card is accepted anywhere Visa or MasterCard (which one is the 4?) is accepted. I’m sure that it’s treated as a debit card, so you may be out of luck with certain car rental companies, but I don’t know this for sure.
Granted, AAA Membership costs $45 or more a year, but if you had a secured credit card, you’re probably paying an annual fee anyway. Plus AAA Membership gives you all of those famous AAA benefits – towing, tire changing, lockout service, travel interruption monetary assistance, arrest bond guarantee (so those pesky Ohio state troopers won’t make you pay cash or take your license), and other goodies.
I’ve not used it yet, because I don’t really see the point for my own personal circumstances. I imagine it would be a good “just in case” type of fund, in case someone robs you when you’re out of town – they may not want your AAA Membership card!
Quick tangential question for US Dopers: is it difficult to get hold of a credit card when you start out managing your own finances?
I do not know how easy it is in the UK at the moment, but when I left for university in 1993 the banks were still falling over themselves to offer me credit cards, even though I had no credit history.
I found the program that **Balthisar/b] spoke of. It’s the Visa/AAA Stored Value Program.
They offer three cards. The one I need is called the Everyday Funds Card, and it’s a pre-paid credit card. If I deposit $100, I have a $100 line of credit. If I buy $50 worth of goods (anywhere Visa is accepted), $50 is deducted from my account, no questions asked, and I have a $50 line of credit. If I deposit another $100, I have a $150 line of credit, and so on.
Their FAQ states that you have the same chargeback protection you would if you had a regular Visa. It also states that you can use it to reserve a hotel room or a rental car, with a few caveats that I won’t get into here. Suffice to say that I’ll use my card to pay for the room/car in advance over the Internet, and then I guess just give a cash deposit or something on check-in. The price of having poor credit, I suppose…
It’s pretty much the same here. A lot of college students get into pretty bad credit card debt for that very reason around here. Cards offered to college students generally have exorbitant interest rates. Alas, I don’t know how difficult it is for someone out of high school, but who didn’t go into college, to get a credit card. I imagine it’s not very easy.
Mr2001, I asked about Visa/MC debit cards at the Royal Bank of Canada, and they did not offer them. I’m on holiday. Perhaps it’s a good time to check the other banks.
I wonder if CAA has a similar card? Might be worth joining even though I don’t have a car…