I have been seeing ads for Safe. Chime, Extra and others ( boy, you click on one and they really zero in on you).
Apparently they all work in a similar way. You put money up front, they send you a card, and you use it like a debit card. Somehow this gets reported to the credit bureaus as positive payment history? Not really sure how that works.
Safe has some sort of reverse personal loan. You sign up, send them $35 a month for 24 months, then they send you a check for $725 (note that you paid $840-- the difference is the interest on the loan-that-is- not- a- loan.)
These things seem borderline scammy…at best exploitive, at worst fraudulent. I’m looking for ways to rebuild my credit but not sure if any of these are worth it. Does anyone have any experience with these or similar programs? I know the costs, specifically I’m asking “Do they actually increase your credit score?”
I think what you’re referring to is a secured credit card. It is very important that you manage one of these properly.
If you have absolutely terrible credit and no easy way to fix it they can be a useful tool IF properly used. But yeah, if you don’t do things exactly right they can hurt you. And financial hurt is the last thing you need from what you said in the OP. It’s not a matter of putting down a deposit and spending it down - you get a monthly bill that you need to keep up with in order to build credit. The deposit is there in case you can’t manage that. If you just make purchases on the card and don’t replenish it at the end of the month it will hurt your credit rating, not help it.
Keep in mind that paying your utility bills on time, getting a store card and purchasing just a bit each month on it and paying it off at the end of the month, and similar techniques also affect your credit.
We used the Discover secured credit card to help our kids start to build credit while they were still in school. Other than having to send in cash up front to set the credit limit, it worked just like a normal credit card. After a year or two Discover sends the cash back and it becomes a normal credit card. It seemed to help set their credit score. But they were starting with no credit history, so I’m not sure about how much it will help rebuild it.
One thing to be sure of is that the credit card does not charge interest in the first 30 days. Some of the secured credit cards start charging interest as soon as you make a purchase. Cards like Discover give you 30 days before they charge interest. As long as you pay off the statement balance every month, you shouldn’t have to pay interest.
The secured cards report to the credit agencies just like a standard credit card. Credit limit, Maximum balance, date opened, and most importantly, payment history. If you fail to make payments and start getting marks in the 30/60/90 day late boxes, you’re screwed for 7 years until they fall off.
If you don’t think you can manage yourself, you’re better off not getting one. Alternately, the next step is to get one and put it in a drawer and forget about it. You get the benefit of a history of no missed payments along with the start date to boost your average card age.
I’ve still got 2 cards with $300 and $500 limits from 25 years ago doing nothing but bolstering my average age.
Seriously, you send them $840 over two years and they refund $725? That sounds like a scam to me. Why not open a bank account and use the debit card you will get? Surely, that will count for something.
The Extra card is more like a rolling secured credit card. You don’t make an initial deposit that sets your limit - you give them your bank account info and they pull your payment from that. The benefit is supposed to be that you don’t have to save up that initial deposit. The downside is if your account balance drops and they can’t pull your payment, you’ve added to your poor credit history.
The ones I mentioned above, although they appear to look and act like secured credit cards, are clearly marketed as debit cards, NOT credit cards. Just wondering if it’s just marketing double speak, or if there is a real difference. I know how a secured credit card works, and that they can increase your credit score if you make on time payments, I’m just wondering about the effectiveness of these alternative products.
The weird reverse loan from Safe especially… the only difference between it and a standard loan is that they give you the money at the end ( after you’ve made your payments) instead of upfront.$725 back after paying $840 is, if I’m doing my math correctly, only a 7% annual interest rate…that’s a great rate for someone with bad credit. But obviously only worth it if it actually boosts your score.
In other words, you are loaning them money, and paying them 7% for the privilege. You would need to be mighty desperate for credit for that to be a wise option.
One reason I am interested in this thread is that My wife and I are contemplating moving to the US and I wonder how to establish a credit score. Apparently, my score in Canada will not be considered. I do, however, have a savings account in the US with about $50K in it. Would that help? I guess I could ask them for a credit card.
If you move to the US with no US credit rating you’ll probably need to put a deposit down on your utility accounts. Pay those bills, along with rent/mortgage on time, and you’ll start building credit. After a period of paying on time that requirement for a deposit will go away.
As I mentioned up thread, the quickest way to build credit is to get a US credit card, spend a little each month on it, and pay it all off at the end of the month. You may or may not have to start off with a “secured” credit card. With 50K in the bank that probably won’t be a tremendous obstacle.
You’re not starting with bad credit, you’re starting with no credit so simply paying bills on time should boost your rating fairly quickly.
I started with no credit history in 1984 and got my first credit card, secured with a pledged balance in my checking account. The difficulty was, I had to shop around at a LOT of banks before I found one that offered this service.
As for the scheme described by OP:
Yeah, deals like that sound scammy. Are deals like this a thing because so few banks offer secured credit cards any more?
I’m going to say none of the above. It’s essentially a loan for $725 with an interest rate that comes out to around 15%. Just with little/no risk on the lender’s side. Where’s the scam or fraud? I haven’t look into all the terms and conditions, but I presume there’s some way to get back a percentage of what you’ve paid in if you have to get out for some reason.
IMHO, you’d still be better off with an unused secured credit card and socking the 35 dollars a month into a savings account for 2 years. You still get the two year on time payment history plus the full $840 at the two year mark.
With most secured cards, your deposit must be equal to your credit limit. But with the Capital One Platinum Secured Credit Card, you can get a limit of $200 for a deposit of $49, $99 or $200. If you can’t come up with your whole deposit upfront, you can pay it in installments before activating your card.
Looks like the best deal. The worst deals are just saving up the security deposit and opening a card a little later.
Do you have a link to this, as I can’t see how this would appeal to anyone. As I’m in the UK and the word “safe” is so common I’m having trouble getting any search engine to co-operate with finding this.
I downloaded the Safe app from my Android app store ( though I didnt sign up for anything else) . The terms and conditions were listed there.
Not sure but I assume it’s available for Apple devices as well. The original ad I saw was on Facebook, I dont know how to make it reappear or how to link to it even if I did.