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07:09:34 AM Wednesday, May 09, 2007

Credit card deals and catch 22 situations

Credit card deals are things that people love talking about as well as things that people love getting. With all the new credit card deals that come out each month and all of the mail, television and online advertising that a credit card company does to attract new customers, it is no wonder that the topic of discussion at many social gatherings can include credit card deals at some point during the conversation.

Add to that the fact that credit card deals are intimately related to credit history which is something that can control our financial lives and you’ve got a topic of discussion that practically sells itself.

Some people, when they initially go ahead and apply for their first credit card, find that they get rejected out of hand and as a matter of fact get rejected quite quickly. Since they don’t have bad credit and because of the conversations they’ve had with friends, this situation is understandably perplexing to them. After all, if they don’t have bad credit, why should they be rejected? Why wouldn’t a credit card company want their business?

Well, it might be because they have no credit.

Catch 22 situations exist all around us in our lives; the biggest and most understandable catch 22 relates to employment. It is difficult for a person to find good employment if they have no previous work experience, but how is a person supposed to get work experience if they can not find a job?

Situations like this where it seems as if there is no way to break the cycle are referred to as catch 22s and a huge catch 22 exists within the credit card industry. A credit card company is loathe approving a person with no credit for a credit card, while the only way a person can get excellent credit is to have credit in the first place!

On the face of it, this seems like a very ridiculous situation. Is it even possible to break the cycle? Yes it is and there are a few ways to do so, some of which are discussed below.

The importance of bank accounts
While on the face of it banking and credit card deals may seem to be two completely different things, they are related in that they both say something about you. Your ability to handle money is reflected both in the transactions that you make with the money in your bank accounts and your ability to handle money is something that credit card company representatives are very interested in.

The reason that credit card companies in general are afraid of a lack of credit is because a lack of credit means that there is no information about the person.

They at least know what to expect when it comes to dealing with customers that have poor credit and they can feel justified in charging higher interest rates and having stricter credit card deals because of it. This is obviously not the case with people that have no credit and for this reason a credit card company will always try to err on the side that does less potential damage to their bottom line.

If you don’t have a bank account, go ahead and open at least one now. You want to open a chequing account at least and preferably both a chequing and a savings account. But away your extra money in the savings account and regularly use your chequing account to make purchases and deposit money.

Seeing the regular, controlled flow of cash to and from your bank accounts will make credit card companies warm up to you and you may find that this act in and of itself is enough to secure yourself a credit card deal.

Security in a credit card
If the bank account activities by themselves are not enough to illicit the interest of a credit card company, then it is time to move onto step two of your master plan. This step involves going ahead and getting a secured credit card deal.

Secured credit card deals are similar to normal credit card deals but have one big difference. Under the terms of a secured credit card you are required to deposit money directly to the credit card account and can not spend more on your credit card than you have deposited with your credit card account.

These are also sometimes referred to as pre-paid credit cards and these types of credit card deals are made for people that have bad credit and can’t get any good credit card deals or alternatively are made by people with no credit in an attempt to build their credit rating up to a point where they can get a better credit card deal from the credit card company they are working with.

Piggybacking off of someone else’s credit
If neither of these is an option for you, or if you’re simply just looking for another option to get the credit you need for all the best credit card deals, there is one more avenue of attack open to you. You can get someone with a good credit rating to agree to co-sign for your credit card (this can be a family member or a friend, the credit card company usually is not too picky as long as the person has good credit).

A co-signer is essentially telling the credit card company that in the event that you are unable to pay the balance of your credit card or make the minimum payments, the loan then becomes the responsibility of the person that co-signed it.

Obviously the person that is co-signing will need to have a lot of faith in you and if you’re known to be untrustworthy, this can be difficult to find. However if it’s just simply a matter of you not having enough credit and you can find a friend or family member that trusts you enough to co-sign something for you, this can be a good way to jump start your journey to a good credit rating.

Just be sure to make all of your payments on time, otherwise not only will you find that your credit score has gone down instead of up, but your co-signer may end up being extremely unhappy with you when they get your credit card bill in their mailbox!