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Premium Cards and Secured Credit Cards

Published by sam - 14/09/07 - 10:09:44 am

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Premium Cards 

For many, a charge card of any once served as a status symbol, but as the cards proliferated, their symbolic value dropped.  Premium cards are supposed to bring it back.  American Express has a premium gold and platinum card, both of which have more stringent eligibility standards.  MasterCard and Visa also offer premium cards.  Because these cards impose higher annual income requirements—from $20,000 to as high as $100,000—displaying them conspicuously may advertise the cardholder’s affluence, but they offer few advantages to justify the typically higher annual fee.  Generally they carry a lower interest rate on unpaid balances (presumably because their cardholders are good credit risks), but since most high income cardholders pay off monthly balances right away, the lower interest rate offers little actual savings.

Secured Credit Cards

For people who have not established a credit rating or have one that is inadequate to  qualify them for any charges card, some banks provide what is known as secured of credit card.  Under this arrangement, the applicant deposits sum of money–$2,000, for example—in a savings account use as collateral to ensure that the card holder will meet his or her monthly payments.  Although the card holder collects interest on this deposit, he or she may not withdraw it without surrendering the card.

This plan is not without its costs, because the required deposit might be earning a considerably higher rate of return if invested elsewhere.  Moreover, individuals whose credit ratings would not qualify them for a regular credit card would probably be wise to forgo it.  But in some cases, it may be a useful interim arrangement, because regular payments on such an account will help establish a good credit rating.

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