There are several ways of getting a credit card. The best and most desirable one is to get an unsecured credit card. An unsecured credit card is essentially a loan. But the credit card companies do not like to give loans to people they know nothing about - people who have just arrived in the USA from another country. After all, they want to be sure that you will be paying them back!
You can also get a secured credit card. A secured credit card is just like an unsecured credit card, but the credit card company will require you to open an account, often a CD (Certificate of Deposit) at the same time. If you don't pay the credit card as you are supposed to, they will help themselves to the CD, so there is no risk for them. You may have to ask the credit card company about such offers, as they are often not advertised. If your application for an unsecured credit card is declined, try calling them and ask about a secured card!
The third kind of credit card you can get is not really a credit card at all because it is not linked to a loan. It's called a prepaid credit card. With a prepaid credit card, you pay a certain amount of money up front. When you use the credit card, the bank will reduce your balance. Once the balance reaches $0, you have to either refill, or you have to stop using the credit card.
Prepaid cards may not work everywhere! In particular, car rental companies will typically insist on seeing a regular unsecured or secured credit card (you can still use a prepaid credit card to actually pay).
Also be aware that, if you lose a prepaid credit card, it's just like losing the money on it! Regular credit cards provide far more protection.
The fourth kind of credit card is also not really a credit card. It is a debit card. Debit cards are similar to ATM cards in that they access your checking account directly, so there again is no loan involved. Unlike ATM cards, you can use a debit card in most stores that accept any of the big credit card names (some stores also accept regular ATM cards). Many banks nowadays automatically give you a debit card when you open a bank account. Hint: ask them to give you a regular ATM card instead, and do not accept the debit card.
Debit cards may not work everywhere! In particular, car rental companies will typically insist on seeing a regular unsecured or secured credit card (you can still use a prepaid credit card to actually pay).
Also be aware that if your debit card is stolen, the thief can use it to empty your bank account before you even know it's gone. For this reason, I consider debit cards the riskiest type of payment card.
When opening a checking account, ask your bank to give you a regular ATM card without debit card feature instead!
| < Prev |
|---|
