Getting Credit : Yes, You Can Obtain a Bank Card at a Low Rate--and Without Paying Expensive Fees

If you’re looking for bargain-rate bank credit cards, the trick is finding them without paying an expensive fee.

Some firms charge anywhere from $20 to $200 for a list of low-rate bank cards, but you can also buy them from several consumer groups for from 45 cents to $5.

Generally, the cheaper rate cards are not offered by major nationwide banks.

“Typically, the smaller local banks are the ones offering the lower rates,” says Gerri Detweiler, director of Bankcard Holders of America, a nonprofit consumer protection group in Herndon, Va. “But the vast majority of people have no idea where to find them.”

That doesn’t mean they’re not looking.

When Bankcard Holders announced in February it had instituted a toll-free number for consumers to call for a $5 list of MasterCards and Visa cards charging low annual percentage rates, 100,000 people called in one week. And inquiries have remained steady at 200 a day since then.

“It’s as if the entire population of Youngstown, Ohio, decided, ‘We’re not going to take it anymore,’ ” says Detweiler, explaining that BHA publishes a list of low-rate secured cards as well as standard ones.

Consumers should beware of many pitches for “guaranteed” credit offers by “unscrupulous marketers,” according to Detweiler. Many are scams that simply sell a list of banks offering low-rate cards, or sell cards that are not real Visa or MasterCards.

“Consumers across the country are being ripped off by companies that promise a quick fix to credit problems,” she says. “Many such companies promise guaranteed credit cards that turn out to be only for buying from a single merchandise catalogue.”

Warns Hershel Elkins, California’s senior assistant attorney general: “People who have been denied credit before think these offers are a great opportunity to get cards. They see advertisements on television, particularly late-night TV, or in mailers or newspapers and magazines. They think they’re dealing with a bank, but they’re giving them nothing but a list of banks for $39 to $99.”

Some organizations offer consumers a chance to get only secured cards, which must be “secured” by a deposit to the bank before it will issue a card.

“In fact, secured cards aren’t a bad idea,” says Elkins, but people don’t understand that they have to have, say, a $2,000 deposit to get a card with a $2,000 credit line.

Central National Bank of Mattoon, Ill., which offers one of the nation’s lowest rate secured cards, was overwhelmed with MasterCard/Visa applications a few months ago when its secured-card APR was published in several financial newspapers and included on the BHA list. The bank ran out of application forms after sending out 5,000, according to Central National’s consumer loan officer Ruth Furry. Application inquiries still come in steadily, she says.

Furry also has dealt with problems caused by several telephone scams, in which people had paid telephone solicitors $189 to $249 after being promised that they would get a guaranteed credit card from Central National.

“It went on hot and heavy,” Furry says, “but the Federal Trade Commission and Visa and MasterCard finally put a stop to it.”

The Mattoon bank charges out-of-state residents 8% APR on its Visa or MasterCard if it is secured by a $1,000 savings account deposit. There’s no annual fee and the savings account will earn 5% annually.

But it’s not easy to get a Central National card.

“Anyone with any previous credit problems would not even be considered,” says Furry. “You have to qualify for this program.”

Central National also topped the list from LeboVision in Marina del Rey. Consumers who recently called the number publicized on a local radio station found out that the LeboVision list cost $20.

“It comes with a money-back guarantee if the banks turn you down,” says Richard Lebowitz, who compiles the list. “But I’ve never had a problem with people wanting their money back.”

Lebowitz says he compiles his list using “three to five different sources, government agencies, national publications” and “checks on banks all around the country.”

Lebowitz’s list contains six banks: the Mattoon bank’s secured card and two others that have Gold Visa/MasterCards with APRs between 7.5% and 11% if you qualify for a $5,000 to $10,000 credit line. The other three banks on the list have higher APRs, but extend a 1% cash rebate on purchases.

BHA’s $5 secured card list contains 15 banks.

Detweiler cautions that consumers need to be especially careful that the cards they choose are legitimate bank cards, not ones that qualify them only to buy from a company’s catalogue.

An example of a catalogue card that she provided is a Texas company that offers a “gold card,” which entitles consumers to purchase products from its catalogue with a 12% APR on the amount financed.

“People are fooled by these gold card offers,” says Elkins. “These are gold cards which give the consumer the right to buy from an organization’s catalogue. And they have unusually overpriced merchandise. They want $249 for a travel bag that should cost about $10.”

Some lists offered for expensive fees are simply rip-offs of those published by legitimate organizations such as Consumer Action and the BHA, according to officials of both groups.

“Some marketers are charging as much as $100 or more just for passing on information consumers can get for free or low-cost elsewhere,” says BHA’s Detweiler.

“A lot of people are ripping off our lists. There was one company, a boiler room operation, a few blocks from our office. We went over and bought our own list for $50. He didn’t even bother to retype it. Just took off our letterhead. After we exposed him, the guy started selling it from his house, his $450,000 house. We turned him over to Visa and MasterCard.”

The former list seller is now advertising an “instant $5,000 Visa/MC. No credit check” in Washington-area newspapers.

That offer, BHA officials say, turns out to be a catalogue card.