The Horizon Gold Card Is Predatory Lending at Its Worst

By Markets Fool.com

When you hit a rough patch and find yourself with a beaten and bruised credit report, perhaps even including a bankruptcy, it can be all but impossible to get approved for a credit card.

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Some companies will try to take advantage of you in this vulnerable state, claiming they can help you rebuild your credit score and offering you guaranteed approval for an unsecured credit card, all without a credit check.

Nine times out of 10, these offers are designed to take advantage of you, rather than help you repair your finances. The Horizon Gold Card is, unfortunately, one of these predatory offers. You should avoid this card at all costs.

Run, don't walk, from the Horizon Gold Card
On the card's website, the Horizon Gold Card is advertised as a guaranteed approval, credit-check-free, $500 credit card. It claims to report your credit line to major credit-reporting agencies, in theory helping you build you credit.

That all sounds great -- but you need to read the fine print.

Horizon Card Services, the company behind the Horizon Gold Card, is not a bank, nor is it an insurance company, credit services organization, or any other structure related to or affiliated with financial services.

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The card you're applying for does not come with a Visa, MasterCard, or other common payment processor's logo on it, because it is not actually a credit or debit card at all. It's technically a line of credit that can be used to buy merchandise exclusively from the Horizon online store.

It's presented much like a legitimate credit card only to encourage you to applying for the card.

The truth about the card is buried deep in the fine print
All of these facts are presented in the Horizon Gold Card's Terms and Conditions document -- that long and lawyerly document we are all guilty of clicking "Accept" on without actually reading.

The company doesn't even guarantee it will report your new credit line to all the credit reporting agencies. The terms and conditions say that it will report your credit line to "at least one," but even that is contingent upon your providing unspecified documentation to the company.

The terms and conditions go on to confirm what I hope is already obvious: "The Horizon Card Services Account does not guarantee aid in building or re-building credit, or to the posting of any positive references to any credit report."

The company does not charge interest on purchases, but that's only because of the truly ridiculous fee structure it uses instead. The cost of the card is actually a monthly "membership fee" of $24.95. That fee is charged whether you use the card or not. That monthly fee adds up to $299.40 per year for access to a mere $500 line of credit that can only be used at the company's online store.

This card is a terrible deal no matter how you slice it. It's unfair to consumers, and it takes advantage of individuals struggling with bad credit.

Everyone, regardless of their credit score, should avoid the Horizon Gold Card.

What should you do instead?
If you're interested in building your credit score and re-establishing your credit after experiencing a financial slump, the most surefire way to do that is to pay your bills on time. If you want to open new credit, contact your bank or a reputable credit card company and see if they will open a secured account for you.

This generally means that you will deposit a certain dollar amount into a special account with that legitimate financial institution. That cash account will be used as collateral to protect the bank or credit union in the event that you fall behind on your payments. It's a win-win situation; you have access to credit and can report a positive account to the credit bureaus, and the financial institution is guaranteed to be paid back.

That card, by the way, will come with a Visa or MasterCard logo, meaning it can be used at all retailers and will actually be reported to all the major credit-reporting agencies.

If you find yourself considering the Horizon Gold Card, or another card with features like guaranteed approvals, please take the time to read the terms and conditions. Doing so will almost certainly save you hundreds, if not thousands, of dollars.

The article The Horizon Gold Card Is Predatory Lending at Its Worst originally appeared on Fool.com.

Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends MasterCard and Visa. The Motley Fool owns shares of MasterCard and Visa. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.