Reaping Your Rewards

5 things to know about fee harvesting credit cards


People with bad credit may have few options for getting a credit card. Experts advise doing a lot of research before signing up for fee harvesting credit cards.

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Is a fee harvesting credit card ever a good idea for people with bad credit?

It depends, say consumer credit counselors and advocates, who generally advise against getting such credit cards. Fee harvesting or subprime credit cards are marketed to people with bad credit who are trying to improve their credit scores by showing good repayment habits. The credit limits are typically low, ranging from perhaps $300 to $500 and interest rates are higher to reflect the greater risk of these cardholders.

Fee harvesting credit cards
How to tell if you’re being offered
a fee harvesting credit card:
  • Does it have a low credit limit?
  • Are there numerous fees such as annual fees, monthly maintenance fees, account opening fees or security deposits?
  • Are these fees assessed before the card is used for the first time?
  • If the answer to all of these questions is ‘yes,’ you’re likely dealing with a fee harvesting credit card offer.

The trick is that the cards often have numerous upfront fees that significantly reduce the amount of available credit — and thus limits the consumer’s purchasing power on the card. Solicitation letters and marketing materials for fee harvesting credit cards often do not clearly disclose all of the potential fees. Consumers who get the cards are often blindsided by the fees, advocates say.

“It looks like it might be a good deal for them and ends up with all these hidden fees. It just puts them right over the edge,” says David Jones, president of the Association of Independent Consumer Credit Counseling Agencies (AICCCA), a nationwide group that represents 36 nonprofit consumer credit counseling agencies that operate 178 counseling offices in 38 states.

Adds Jones: “A consumer should be very careful to look at all of the fine print and card agreements and understand what they’re getting into.”

Federal regulators have targeted the cards for greater disclosure requirements, but some consumer advocates say fee harvesting cards should be banned outright as deceptive and unfair. Banks that issue the cards say they are providing a service for the unbanked and for those who could not qualify for credit elsewhere.

Consumers should set a goal of finding “a card with a single-digit interest rate and no annual fee,” says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. “Anything higher than that could indicate the card is a subprime product.”

The National Consumer Law Center, a Boston-based consumer rights agency, and credit counselors offer the following advice for anyone considering fee harvesting cards:

1. Read the fine print. Be aware of the upfront fees. Asks Cunningham: “What is the interest rate and is it fixed or variable? What is the grace period for payments? What is the late fee if a payment arrives late or is missed? Will the interest rate increase in the event either of those things happen? Can the card be used anywhere (or just through a catalog they offer)?”

2. Shop around. There may be better offers from other issuers.

3. Find alternatives. Prepaid or secured credit cards may help you rebuild your credit without a bunch of fees. Secured cards require that you put your own money into an account. You then use the funds on a credit card and repay the amounts due each month. Debit cards may be another alternative to consider.

4. Don’t believe the hype. Many of the marketing materials for fee harvesting credit cards come in the mail or through Internet, television or telemarketer ads and pitches. People desperate for a credit card may fall for slick advertising that may fail to reveal information needed to assess whether the offers are good deals for you. “If a credit card offer seems too good to be true, it may turn out to be a very bad deal,” warns a National Consumer Law Center study.

5. Ask yourself why you need the card. If you need to repair a bad credit history, consider other options first.

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See related: FTC: Subprime credit card marketer must repay $114 million, Evils of ‘fee harvesting’ credit cards, Feds seek $200 million for ‘fee harvesting’ credit cards, Secured credit cards help rebuild good creditNeed proof of racial profiling in credit cards? Ask Rich Aguirre


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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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