Credit Scores and Reports

Avoid advance-fee ‘credit cards’


Advance-fee credit cards target consumers with bad credit, but charge massive fees, don’t rebuilt credit and can’t be used like real credit cards. Avoid them.

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You may have received what appeared to be a credit card in the mail along with a letter promising something to the tune of “You are already approved” or “Clean up bad credit.” If you have bad credit, it may have been tempting to follow the included instructions: Dial a toll-free number, key in your “activation code” and speak to an operator requesting your bank account number. Perhaps you found out the hard way that these so-called “advance fee” credit cards are not credit cards at all.

What these cards do is first hit you with fees — from activation fees to processing fees to membership fees to renewal fees to credit protector fees — before you have used the card to make a single purchase.

Unlike a major general use credit card such as Visa or MasterCard, an advance-fee credit card does not enable you to charge just any purchase wherever a credit card is accepted. Instead, they can be used to buy only merchandise from within a closed loop of the card issuer’s own catalogs.

Don’t expect these cards to help build your credit like a credit card for bad credit customers, either. Although the companies that issue advance-fee credit cards may claim to report to credit bureaus, quite often they do not. If you have had credit problems in the past, you may also instead want to consider a prepaid debit card.

Beware of any such offers you get in the mail. If you do receive an advance-fee offer in the mail, destroy the card and shred the offer letter. Consumers who have already become victims and have had money debited from their bank accounts should file an affidavit with their banks to revoke the debit. If more than 60 days have passed, request to file a fraud complaint. While it is a hassle, consider closing your bank account and opening a new one to avoid having money stolen.

U.S. residents who believe they have been the victim of an advance-fee scam can report it to the FTC online at, or by dialing the toll-free number (877) FTC-HELP ((877) 382-4357).

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