UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: Globetraveler Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308691  
Subject: Re: Secure Credit Card and APR Date: 1/15/2013 10:29 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
In this case, the security is in the form of a 2-yr CD at today's standard absurdly low rate. The value of your CD is your credit limit. I have been familiar with the concept of secured cards for a long time, but it never occurred to me that there would be an APR on them if you ran a balance. You are borrowing your own money. There is zero risk to the bank, and I suspect the administration of having to collect on a bad debt isn't anywhere near 9.9%, not to mention they are still making money off of your CD deposit

Isn't the CD used as collateral in the case of a person defaulting and not paying on the credit card?

For the normal user, they would put charges on the secured credit card, make a payment, and possibly carry a balance. If they do carry a balance on the card, the 9.9% interest rate is the cost of the financial institution loaning money to the secured credit card user.

The CD has little to do with the interest rate. It is being held as collateral in the event the person defaults. 9.9% is a decent rate, so I'm guessing the financial institution is giving a discount on the credit card interest because they do have the collateral if something goes south.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (11) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

TMF Credit Center
The Motley Fool Credit Center arms you with real tools and simple messages, that will help you in every credit situation.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Apple

The Saddest Place on iPhone Day
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement