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The Top Ten biggest credit card companies control 75% of the industry while the remaining 25% is spread among thousands of smaller companies. One of the fastest growing areas of the industry are VISA and MasterCard’s offered by large retailers like Sears and Target. In its first two years over 20 million people signed up for the Sears Gold MasterCard.
The Fine Print - It's Says Fee not Free
If your a day late you get a fee, a dollar over your limit, you get a fee. Did you ever wonder why if it's over the limit it was approved to begin with? Sure you have a limit on what you can charge but they'll let you go over the limit, knowing you probably won't be able to make a full payment, you get interest charges, over-the-limit fee, and next month you pay interest on last month's over-the-limit fee, and then the next month you pay interest on last months interest on the previous months over-the-limit fee. Want to go over your limit? No problem, your friend will be there to help you out.
I recently heard that 31% of credit card company profits come from fees. And now there are new fees for balance transfers and overseas transactions. So exactly what kind of friend do you have here anyway?
The Secondary Debt Market
You may not know it but there's a huge market in secondary debt. If you don't pay your bill your debts will probably be sold to another company. Of course the original creditor will probably take a credit on their taxes, so they save on taxes and make money selling debt as a commodity. Not a bad deal, huh! But it won't stop there. You debt may be sold several times before it winds up in an automated dialer and you get a call from a friendly bill collector. Yes, there are people making lot's of money just buying and selling old debts.
Debt Alerts and Scams
Safe and secure, sounds like a good deal, but take a closer look. Many credit card companies prey on folks who have bad credit and are desperately trying to get a fresh start. They may even guarantee you a credit card. These offers generally fall into one of two categories, one being a card secured by a savings account and the other being one where no saving account is needed.
A card that's secured by a savings account can be a legitimate and good way to have a credit card and repair a credit report. A deposit is made into a savings account and the credit card company in essence lends you your own money at a high interest rate. If you don't pay them they just keep your savings as payment. If you do pay them they'll lend you your money again. The only possible benefit that I see to this process is that they will report your payments to a credit bureau, at least they should, be sure and verify this before opening an account if this is your desire.
If you don't care about the credit report, just get an ATM card with a credit card logo on it. You can only spend what you've deposited, just like a secure credit card but there's no interests charges, no annual fees, no late fees and hey guess what, no over-the-limit fees.
No savings account required would then by comparison sound pretty good, right? Look again! These guys will talk about credit limits of up to $1,500 but don't bet on it. What's likely to happen is you'll be approved for $150. Then some interesting charges start to appear. Be prepared for an application fee of maybe $99, and your annual membership fee is $49. Great, you get a credit card with a $150 limit with $148 in charges on it, so go out and have fun with your $2.
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