Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: MONDAY, March 23, 1992                   TAG: 9203210058
SECTION: BUSINESS                    PAGE: A7   EDITION: METRO 
SOURCE: MAG POFF BUSINESS WRITER
DATELINE:                                 LENGTH: Medium

SECURED CREDIT CARDS OFFER HOPE TO HIGH-RISK CONSUMERS

Or if your credit history reads like a horror story of late charges, skipped payments and perhaps even bankruptcy, how can you get credit to make a fresh start?

In either case, a bank credit card seems out of reach. You must carry cash to buy everything. And just try to rent a hotel room without a credit card.

But the situation isn't hopeless if you have income and determination to handle credit wisely. You should be able to qualify for a secured or collateralized credit card so you can build or restore your reputation.

Under this type of plan, deposit money in a savings account with a bank. The bank, in turn, will grant a line of credit up to the amount of money you have in the bank, plus pay interest in the account.

Merchants have no way to detect that a Visa or MasterCard card is secured.

Under the plan, you cannot withdraw money in the savings account that acts as security for the credit card as long as there's an outstanding balance.

The deposit is returned to people who pay off their balance and turn in the card. Or, for people who prove themselves credit-worthy and qualify for an unsecured card.

A sample list from Ram Research Corp. shows a wide disparity in terms for the cards such as the interest rate on charges, annual and application fees, and the rate earned on the security deposit.

The required savings deposits range from $250 to $5,000.

In virtually all cases, the line of credit equals the amount of the deposit. The exception is Texas Bank which lends 90 percent, meaning $555 is the minimum to support a credit line of $500.

Signet Bank is the only Virginia institution on the Ram Research list and Matthew Cooper of Signet's credit card division in Richmond, said it's the only bank in the state offering secured cards, to his knowledge.

Signet has had good experience with the program since it was launched about 18 months ago, Cooper said. The bank plans to promote the idea more aggressively.

Cooper said secured cards are a good way of helping people without a credit history, or with a bad history, prove that they are sincere about handling credit now.

Only two types of people are rejected out of hand:

Those who lie on their application forms. Cooper said the information is verified, so people who claim to work for a company should indeed be employed there.

People whose check for the required savings deposit bounces. That really does happen, Cooper said.

Signet charges a $30 application fee for people who respond to the bank's solicitation mailings. Cooper said paying the fee demonstrates that applicants are serious about wanting the card.

But Signet waives the application charge for people who telephone its toll-free number or come to the bank in person.

Cooper said the interest rate of 19.8 percent equals Signet's highest rate on a standard card. Its $20 annual fee is identical with that of its unsecured credit card.

The only difference between secured and regular cards is the security deposit in the bank, Cooper said. Signet issues its regular Visa or MasterCard.

Signet recently lowered its minimum savings account deposit from $500 to $300. It will accept as much as $5,000, Cooper said, and the card limit matches the deposit.

The bank still pays 5 percent interest on the security deposit, which is more than it currently offers on other types of savings accounts.

Those customers who prove themselves credit worthy over a period of 12 to 18 months are considered for a larger line of credit. That means, Cooper said, that the $300 savings account might support credit of $600 or even $900.

The banks listed in the chart represent only a portion of nationally available secured cards.

A list of banks issuing secured credit cards is available for $10 from Ram Research Secured Report, Box 1700, Frederick, Md. 21702. Ask for "Secured Card Report," a 16-page publication with hints on applying for the best card and on rebuilding good credit.