Secured Vs. Unsecured Credit Cards – What’s The Difference?
Many consumers have a bit of confusion when it comes to distinguishing a secured credit card from an unsecured credit card. They both carry a brand logo from one of the major credit card companies and they both can be used anywhere that major credit cards are accepted. It is the behind the scene financial activity that determines the difference between a secured and an unsecured credit card.
A secured credit card is a guaranteed VISA or MasterCard that has been secured by a deposit to the issuer's bank. Generally, you must deposit an amount, ranging from $300 to $5000, in a low-interest saving account or CD to secure the credit card.
You then receive a credit line for up to 100 percent of your account balance. Each creditor has its own requirements for how much you can deposit for your credit line. The creditor issues you a credit card [http://www.easy-approval-credit-cards.com] by using your deposit as security.
On the other hand, an unsecured credit cards offer just that -credit. When you make a purchase or withdraw cash (usually called a cash advance), funds are drawn from your "line of credit." You pay back the amount you borrowed or "charged" each month, or carry over to the next month (revolve) a certain amount that was borrowed and you are assessed an interest charge.
You are then responsible to pay the interest charge as well. Credit cards carry a brand logo (e.g., Visa, MasterCard, American Express, etc.) and are accepted by participating merchants. When you use your credit card, the transaction requires a signature.
Determining what type of credit card is best for you will depend on your personal budgeting and spending habits as well as the status of your credit score. People with low credit scores usually have a better chance at obtaining a secured credit card over an unsecured credit card.
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Shocking Facts – What Debt Settlement Companies Don’t Tell You
If you're thinking about using a debt consolidation or debt settlement service to help you get out of debt faster and save money on your monthly payments, make sure you do your homework before choosing a company. There are definitely shams and scams out there.
First let me say that debt consolidation is *not* the same as debt settlement/negotiation, which most people don't realize.
Debt settlement companies charge hundreds of dollars as an initial "admin fee" to set up your account, plus a monthly service fee. The fees vary depending on the company and the amount of your debts.
Such companies take your money every month, but don't make monthly payments to your creditors! Instead, they put it in a trust account, negotiate your debts with your creditors, then make a lump-sum payment when there's enough in your account to pay a creditor in full.
That can take *years* depending on the amount of debt you have with each creditor. Meanwhile, you can be sued by your creditors and your wages can be garnished! (Or just don't make payments to your creditors. You'll end up in the same spot without paying someone to help you get there!)
Settlement companies don't ask your creditors to stop all interest, late fees and overlimit fees from accruing. That means while the negotiations are ongoing, your bills will continue to grow! So if you're sued and a judgement is brought against you, you'll owe more money than before!
And shoddy companies, which there are alot of, don't tell you *any* of this up front. I call it "getting permission by omission" because they simply don't tell you how their program works *before* you sign an agreement with them. Or after, for that matter. But if you ask the right questions, eventually you'll figure it out. (Or when the crap hits the fan. Whichever comes first.)
Let me give you an example of how debt settlement works.
Let's say you have $20,000 in unsecured credit card debt. You owe $10,000 to one credit card company, $6,000 to another and $4,000 to a third. You agree to a 5 year plan where you pay $250 a month to the settlement company. (After all, $250 a month for 60 months is only $15,000, so you're saving $5,000 and you'll be debt-free in 5 years, right?)
The admin fee will cost you $750. Your first 3 monthly payments go towards that and nothing gets put into your trust account until your 4th month.
The settlement company keeps $50 of your $250 payment each month for the service fee. That means $200 a month is being added to your trust account.
Most debt settlement companies claim to be able to negotiate your debt for about 50% of what you owe. So let's use the lowest credit card debt as an example.
If you owe $4,000 and your creditor agrees to accept $2,000 as payment in full, it will take 10 months at $200 per month to have enough in your trust account to pay off just that one credit card.
But remember, your first 3 payments to the settlement company only paid the admin fee. That means your first credit card settlement is 14 months *after* you started sending them money.
So what's the problem? It's simple. Your creditor won't agree to accept half of your actual debt unless, or until, it can be paid in full. Otherwise, you're expected to make your normal monthly payments.
Since you don't have $2,000 in your trust account, and you won't have it until more than a year after you stopped paying your creditor directly, they'll probably take you to court and request that your wages be garnished long before you have that $2,000 built up.
And what about your other creditors? Well, they'll be waiting even longer to get their money from the settlement company. The $6,000 debt will take 15 *more* months to pay off, assuming your creditor waits that long and agrees to 50%. And that $10,000 bill? You do the math.
On the other hand, if you signed up for a 3 year plan with the settlement company, your debts would be paid off sooner. But, the question is, will your creditors wait that long? Probably not.
The facts are, you can negotiate with your creditors yourself. Most will agree to take a smaller monthly payment from you and stop all interest and fees from accruing. And, of course, you'll save thousands of dollars in fees to a settlement company.
Before signing up for any service, please be sure you check out the company thoroughly. And don't let the words "non-profit" fool you either. Alot of debt settlement companies claim to be non-profit.
Going back to the example above, if you pay them $15,000 over a 5 year time frame and they settle your debts at half of what you owed, they'll make $5,000 from you. I'd call that a profit, especially since they might not have actually helped you in any way.
Most companies will allow you to cancel your account and get a refund of what you've paid, less the non-refundable admin fee and the monthly service fees. If you feel you've been mislead about their program, don't hesitate to argue til the cows come home. File a complaint with the Better Business Bureau or hire an attorney if you feel you're getting nowhere.
You can visit the Better Business Bureau's website ( http://www.bbb.org ) and find reports on hundreds of companies. Here's a small listing of companies that have poor reputations with the BBB:
National Consumer Debt Council LLC - Irvine, CA (A.K.A. NCDC, United Consumer Law Group)
Financial Rescue Services - Burbank, CA
Debt Legal Services - Anaheim, CA
American Debt Relief - Los Angeles, CA (A.K.A. A M Debt, American Debts Relief, Debt Relief)
Please be very cautious when choosing a debt help company and ask lots of questions before agreeing to anything. If you find they're evading your questions, run fast and run far. There are reputable companies out there, so keep looking until you find one.