Here’s one that even the most reputable lenders go in for – trying to sell you useless credit insurance. This is usually an insurance premium that is automatically added to your interest each month, and covers you against very unlikely things, like dying and not being able to pay back your debt. It is almost never worth ticking the box to buy insurance.

 

Of course, there are some instances where credit insurance will be helpful, for a small segment of the population.  We talk more about this in another chapter of this book.

 

The other thing about this “scam” is that you don’t always even have to sign for this insurance to take effect; just putting a check mark in a box is enough.  Be careful what you check off.

 

6. The secured card

 

A secured card is one that requires you to make a deposit before you can use it – a deposit that can sometimes be as much as the limit on the card itself. Secured cards can be a good way of rebuilding your credit when it’s all gone wrong, but don’t take one from a lender you’ve never heard of. With more unscrupulous companies, you will often be charged an annual fee, an application fee, and any other fee they can think of, all of which are added to your debt. Don’t let it happen to you.

 

Another thing about secured cards.  If you are in a position where you need one to reestablish credit, once you’ve done so, pay off the card and cancel it, so that the annual and other fees stop.

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