A Debt Collector Offers You A Credit Card, What's Wrong With This Picture?

Like countless others, reader Ryan is in debt. His debt is to the tune of $1,364. He received an interesting offer from the debt collector who is offering “debt reduction” in the form of a pre-approved Visa card in which his $1,364 debt would be reduced to a $1,200 balance if he accepts the card. He would need only to to pay off the balance under the terms of the credit card to eliminate his debt. Ryan wisely wrote to us to ask if this is a good idea. Actually Ryan, it’s a really really really bad idea. His letter and our advice, inside…

Dear Consumerist,

Unfortunately, this blog did not exist when I was 21 and trying to make it through college. I was poor, and the fed was stingy with the financial aid. So, I turned to credit cards and it is the biggest regret that I have. Debt collectors call daily, and I know just by the look of the envelope if there’s a collection notice in the mail. Thankfully I have a place to live and a car that runs fine, so I feel as though I don’t need a good credit score (but I’m sure it would help in the future).

Lately I’ve been getting pre-approved credit card offers in the mail, but they’re of the type that already have a $200 balance on them before you even get them. I’ve already had enough trouble with credit cards, so I immediately throw out these offers. Today I got what looked like another one of these, but after reading the notice it turns out that it’s not quite the same.

The offer I received today is from one of the companies that bought one of my debts. There is a picture of the offer on my flickr account here. In this offer, they tell me that I can have my debt placed on a Visa card and pay off the card. The interest on the card is 19.9% and there is an annual fee of $35 which is waived for the first year. I have such bad credit that I don’t worry about identity theft, so these terms are better than anything I’ve seen in quite some time.

So, I’m just wondering if this is a good idea. The notice says that I have until July 7th to accept this, so I’m in a bit of a rush to find out if it’s worth it. If so, I think the first (and only) place this card would go is into a block of ice.

Thank you!

It may seem like an attractive offer on the surface, your debt of $1,364 gets reduced to $1,200 if you accept the card. But this difference will most certainly be mitigated by fees and interest that this card has cleverly implemented. This particular credit card is probably one of the worst credit cards ever, it is riddled with booby-traps designed to hit you with fee after fee. Here are some of the pitfalls you should be aware of:

  • Simply by submitting the application for the credit card, you will temporarily get 3-5 points subtracted from your credit score, but this is true with any credit card.
  • According to the terms, your first minimum payment is $37 which is due 20 days after you receive your statement. If you don’t pay in time there is a $19 late fee.
  • This card is designed to make you spend over your credit limit. Your balance starts at $1,220 and the credit limit is $1,270. Considering your interest would be about $20 dollars a month at 19.9%, a small purchase could easily put you over your limit, incurring an additional $19 fee.
  • According to the terms, if you miss a payment in the first 3 billing cycles, the card will be revoked and your original debt of $1,364 will be reinstated even if you have paid off some of the balance already.
  • Default rate – We haven’t seen this card’s full terms and conditions but typically if you violate one of the conditions in the agreement such as late payment, NSF check or charging over your limit, your interest rate could be jacked up to as high as 36%. This is true with any card.

Naturally, paying off your debt is the best idea, short of that, this card is nothing to mess around with. They are just trying lure you with a shiny piece of plastic so they can get their hooks in deeper. The only way a card like this would be useful is if you made a large payment on it every month. Of course, if that were possible, you probably wouldn’t be in debt in the first place.

If you need assistance paying your debt, each state has non-profit angencies that can assist you, usually for a small fee. In many cases, they can sit down with you and help you work out a monthly payment plan without any nasty 19.9% interest rate. Some websites that can provide you with more information are:





One other tactic involves trying to cut a deal with the debt collector. They pretty much assume they won’t be getting all of their money so they are often agreeable to reducing your balance if it gets paid within a certain amount of time. However, not all debt collectors operate in this way. Good luck, Ryan.

(Photo: Getty)


Edit Your Comment

  1. weakdome says:

    I feel your pain. I did the same thing in college and it takes a long time to dig yourself back out again. It can be done though and your credit score doesn’t suffer quite as badly as you might think. Hang in there!

  2. BoomerFive says:

    @weakdome: Exactly right. I had some bad habits as a young man and it took a bit to dig myself out. Just stick with it and make good decisions and you will be ok. I went from a 530 credit score to a 775 in about 5 years.

    To the topic at hand, I would be very very careful here. I got one of these on the mail recently and it turned out to be a bit of a scam. I was pretty sure the debt they were using as a basis for the offer had been paid quite awhile ago. I told them my credit score did not list this debt (it didn’t) and that I was disputing it. They said they would send all the documentation about the debt and offer to me in the mail. Never received anything and have not heard from them since.

    My advice is to get a handle on EXACTLY what you owe and to who as soon as possible. There are all kinds of unscrupulous debt collectors out there.

    And the advice in the article is right on. The LAST thing you need is a credit card. I think taking it would be a big mistake.

  3. BoomerFive says:

    To the Op also, do yourself a favor and google “Resurgent capitol services scam”. Doesn’t look like a good company to deal with.

  4. hoosierdaddy812 says:

    I would be curious to know where you debt currently is? Is it a loan or on a credit card? I simply ask because $1364.22 really isn’t that much compared to what it could have been. Although, if you have this debt on a current CC you might look into transferring it to a credit card with 0% APR on balance transfers. There are many options out there and this could give your the ability to pay it over time without worry about interest, but make sure you pay it off before the introductory period runs out.

    Although, since you mentioned that you had problems with credit cards in the past it might not be a wise idea if you don’t feel your responsible enough now to manage it.

    There are quite a few personal finance blogs out there that might be able to help you out though. You should have a look at:


    there are lots of people out there going though what you are and plenty of advice to be found. I wouldn’t be down if I was you considering your level of debt isn’t that high. If you don’t have enough money to pay it now you might consider getting a part time job for a few months and simply pay it off quickly.

  5. pmathews says:

    My wife and I made the same mistakes in school. It really hurts to think that the $800 we spent on books one year compounded on that darn CC. Banks love students. Most universities have banks on campus or very very close by where they will easily give you a CC right on the spot most times. They are scum…

  6. aphexbr says:

    Call me crazy, but this doesn’t seem insanely bad to me. Accept the card, set aside $100 minimum per month to pay it off and hide the card somewhere so you’re not tempted to use it. Pay the $100 as soon as you get the statement.

    You’re out of debt in just over a year, in less time than without accepting the card, or you have something to fall back on if there’s a true emergency situation, and you bump your credit rating up (enabling you to get a decent card without the high interest and annual fee).

    Of course, that assumes that everything goes smoothly and the cynical might say that anyone capable of doing this wouldn’t have racked up the debt in the first place. Also, one slip – in you control or not – would start racking up the debt again. I’d be tempted just for the $144 wiped off the debt, but I know I wouldn’t have a problem keeping to that kind of spending plan…

  7. Womblebug says:

    It states the original creditor is Best Buy and the current creditor is LVNV Funding. Googling them shows they are a third party collection agency, which means (unless there are terms here I am unfamiliar with) that currently, no further fees or interest are accruing to the debt. If you make payment arrangements on the account, you can pay off just the $1364.22.

    Move it to the credit card, and you will immediately start accruing interest on the whole (discounted). Additionally, as this is a new account, the credit reporting clock starts all over again, so they have even more leverage against you on this.

    Bad deal all around. Make monthly payments on this until it is gone, and then get a real credit card. Not a POS collection agency moneymaker.

  8. bohemian says:

    I googled the company with “sioux falls” in the search. Since that was on the letter. They are running this out of the back of a run down semi-occupied shopping mall. There were also lots of results about this being a scam. Please please please write to the SD atty general’s consumer protection office and complain. SD has no ursury laws so we are the home to tons of scammy credit card companies. Lately there have been tons of debt collection agencies popping up that make the scammy credit card companies look good.
    It sounds like this place is probably running afowl of even SD’s very limited consumer laws.

  9. PinkBox says:

    Geez. The interest rate alone will net around $250.

    I suppose if you have bad credit and are unable to get a credit card, this might actually help your report if you pay it off in time, and avoid any late fees.

  10. How could OP be so foolish as to get in to debt during college? I meant, c’mon, why does he need to eat, buy books or have a place to live? I blame the OP. (just kidding)

    OP, I think it would be a very bad idea to accept this offer. I have been where you are: collections agencies breathing down my neck and it feels like it will never end. Even though some commenters are saying $1364 isn’t that much, I’m sure it feels like a lot to you and it’s very relative to your overall cash flow situation.

    If you contact the current debt holder, you can work out payment arrangements with them. One option is to pay off the entire amount, in which case your credit reports would say the debt has been paid in full. Or, you can negotiate with the collector for a reduced amount. Then your credit report would say that the account has been satisfied, but for less than the original amount. It is a bit of a worse remark than being paid in full, but still much better than not paid.

    In any case, do NOT pay a dime to anyone for this debt until you receive a written letter stating the terms of the deal you’ve made with them. This letter should include your name & address, their name and address, the account number, balance, amount of negotiated settlement (if less than original balance), the dates on which payments are due, and the amounts of the payments. Spelled out in no uncertain terms. Also, keep copies of all canceled checks used to make these payments. Keep the originals of all these documents, always send copies to anyone when needed. You may need all this stuff to provide copies to the reporting bureaus to prove the debt is settled.

  11. I recieved this same offer. It was an a credit card I defaulted on in college. It went to collections and I think the “credit card” you are getting is a great tool for the collection agency. In my case I took the credit card and paid the balance down to near zero. Then I kept the card opened for a year with a small balance and consistant payments to help undent what damage the collection account did in the first place.

    Over all it is a bad credit card, and not worth shaving a couple hundred dollars off your debt. If the account is in collections anyways, then maybe you can use it to rebuild your credit a little bit, but don’t take the card out unless you have the cash to eliminate most of the balance. The interest rate is really high. Mine started at 19.9% and I have no clue how high it can go. I never asked because I was paying it off so quickly.

  12. SonicMan says:

    It really depends.

    If this is legit, then its a good deal. If you can pay off the balance right when you get it. Your saving money that way.

  13. @SonicMan: How is it a good deal? Like someone else said, the interest on the new credit card alone will eat up the “discount” they are offering. Not to mention the annual fee that’ll kick in the second year.

    It is NOT a good deal legit or not.

  14. mbd says:

    Also note that if you work out a settlement, you need them to send you a letter via USPS indicating the terms. Whatever you do, don’t accept a FAX.

  15. @mbd: Why do you think a fax is not acceptable?

  16. Roycester says:


    They’re called Fee Harvester cards and they are designed
    to re-start your debt obligation. You can read about them

  17. SonicMan says:

    @Pixelantes Anonymous: If it was paid as soon as he did it. He would be saving that $164.

    If he could not pay it off then, it would not be a good idea.

  18. zentex says:

    You can settle most debts for less than or close to 50% of the face value. No matter if it’s a Collection Agency or a “Law Firm”**.

    Most times you can work out a payment plan on the reduced rate. Getting out of debt isn’t rocket science, you just need a clear head and a plan. I would imagine it’s easier to settle for less now, than it was 6 months ago.

    READ UP on the Debt Collection Laws. There are things they simply cannot do (threaten jail time, take your property). DO NOT let any collector swindle or strong arm you.

    ** Some purported ‘Law Firms’ are simply a facade for the collection agency. How it’s legal, I don’t know…but I’m dealing with one right now; thankfully I’ll be done next month. I did my homework and I’m disgusted at this company’s business practices (althou not surprised)

  19. pgaulrapp says:

    If the debt is valid, just start making payments on it. They aren’t charging you interest right now, but this card will allow them to get more money out of you than necessary.

    Real credit cards will come, in time, but this is such a bad idea.

  20. APFPilot says:

    @heavylee-again: Well, the debt is from best buy and last time I checked they don’t sell textbooks or ramen. I don’t buy the sob story.

  21. Lyn Never says:

    I did this several years ago, with a pretty freshly-defaulted debt that I could not settle in chunks any larger than the payments on the card and a recognizable credit card company (Capital One, yes, but before they got horrible). Since I’d just been unemployed for 9 months, things were pretty bad and I was grateful for any debt I could actually manage to start settling right then.

    I got it paid off, they made nice reports to the credit reporting agencies. It cost me a little more than using a non-profit credit counseling program, but I think I got a better credit bump at the end.

  22. tujsin says:

    Before you do anything you should ask them to validate the debt by sending a proper “validation” letter. If they can’t provide the CORRECT information back to you then the debt gets dropped and HAS to be removed from your credit reports, or else they’ll be in violation of the credit reporting act.

    Half the time when debt is sold off to collectors they don’t have the full necessary information/original documentation to properly collect. They usually just get the original creditor’s name, balance, date of charge-off and then customer information.

  23. Jbball says:

    I too, like most, had problems with debt. I’ve just recently been able to pay off ALL of my debt in full and I’m moving into my house in 3 weeks free and clear.

    There’s only two things you need your credit for: Houses and Cars. Save up and pay for everything in CASH! It’s an extremely hard lesson I’ve learned, but thankfully, I’m only 26 and have plenty of time ahead of me to make up for it all.

  24. @APFPilot: Try saying that to a Computer Science major. We need computers to do our jobs.

  25. mbd says:

    Debt collection companies are in the business of collecting debts. They are not in the business of helping you out. Anything a debt collection company does is intended to collect their debt and maximize their profits. Any offers from a debt collection company should be evaluated in that light.

  26. atypicalxian says:

    @APFPilot: But they do sell calculators, computers and word processing software for term papers (not that I’m a fan of Best Buy — if I had my druthers, they would be in the top 4 for Worst Company in America).

    @mbd: Absolutely right. Shred the application now.

  27. APFPilot says:

    @atypicalxian: Buy that shit on campus, especially the word processing software.

  28. katylostherart says:

    paying debt with credit is generally a bad idea. the only real exception would be refinancing mortgage for debt consolidation or taking out a mortgage on already own property for it. and obviously in this country right now, that doesn’t work.

    don’t do it, really really bad idea. it’s like paying your mastercard with your visa.

  29. katylostherart says:

    @APFPilot: almost everything bought at a school bookstore is more expensive than you can get it for somewhere else. basic things like pens, pencils, lined notebook paper are pretty on par. but books, software, art supplies and other tools are almost always more expensive on campus than out in the rest of the world. and this isn’t even taking into account discount stores, schools like the mark up.

  30. AustinTXProgrammer says:

    I haven’t seen anyone else bring this up, but you will loose a great deal of the FCRA protections if you accept this. While original creditors are still supposed to follow most of the provisions, you have no private right to sue them for violations.

    @katylostherart: At my university we could get software dirt cheap from the school (not the coop bookstore). They had a license with MS that extended to students and most MS software was available for $5/CD.

  31. Coelacanth says:

    @APFPilot: The bookstores were a ripoff. By shopping around at other places, I could sometimes save 40%-50% without much effort.

  32. I do have a question: When a debt is sold to a third party after chargeoff…the third party normally buys the “paper” at 35 to 40 percent of the original debt. Therefore if say, the debt was 1000.00 and the 3rd party bought it for 500.00, and you paid the 3rd party the full grand, is’nt that pure profit for the 3rd party? If it is profit, does’nt it still show on your credit report as “paid in full” even after it was written off by the original creditor?

  33. Rectilinear Propagation says:

    Just the fact that they can reinstate your entire debt at all wipes out anything you could get out of taking the deal. I think the OP should avoid it.

    @APFPilot: So then his debt comes from purchases at a campus store instead of Best Buy. It wouldn’t make the purchases more or less legitimate.
    Unless the campus store had educational discounts on the software that he couldn’t get at Best Buy it amounts to the same thing.

  34. VicMatson says:

    I got the same letter from the same company, so I investigated and found that the original debit was 20+ years old and past the SOL. Resurgent insisted it was a new debit(old argument) so I passed.

    I think they are just trying to re-age some old accounts when the customers credit is now good(+700)!

  35. APFPilot says:

    @katylostherart: Software is hardly more expensive at the bookstore. At my first college we got anything MS for free or cheap, at the second we got it at the educational price, a HUGE discount.

  36. katylostherart says:

    @APFPilot: any software i’ve had to purchase that wasn’t included in the price of book it came with in a course was cheaper somewhere else. specifically only autodesk and oracle were cheaper acquired through the school.

    most companies offer an educational discount of their own that’s equal or better to what the school offers. i know apple does and i know adobe does.

  37. Resurgent Capital is part of Sherman Acquisitions, which is one of the worst bottom feeding collection companies out there. I suggest reading this page from Bud Hibbs for more information- [www.budhibbs.com]

    I work in the field of ID theft and I deal with these idiots on a regular basis. Half of the people working for them have no idea what the FDCPA is, and the other half don’t care if they violate the laws of the FDCPA regularly as long as they get paid.

  38. @BeFrugalNotCheap:

    Isn’t that pure profit for the 3rd party?

    Yes, and they usually pay more like $10 for a $100 account. Third party debt collection is currently a multi billion dollar industry. They make enough to settle lawsuits so they can continue to push the envelope (or break it altogether) in terms of the law.

    does’nt it still show on your credit report as “paid in full” even after it was written off by the original creditor?

    It depends on the collection company and how they report it. Not all of them report it correctly, and if you pay it there is no guarantee what they will do.

    The lesson should be, as always-


  39. OMG. NO. No. Please OP, NO.

  40. varro says:

    Bankruptcy attorney here – stay away from the offer.

    Many of the previous posters are correct: they may be trying to revive a dead debt; the fees will attack you; and you should be able to settle the debt for a lump-sum payment of 40-50% (but will be liable for taxes on the amount discounted.

    Good luck.

  41. kingmanic says:

    @varro: You forgot to postface that with:

    “but I am not your bankruptcy attorney, this is only general information”

    eek your liable now!!!

  42. Grive says:

    @pmathews: You reminded me, in my college, you could make your Id card a credit card, or a debit card. I went through a couple hoops to get away from that.

  43. KarmaChameleon says:

    How the heck is this legal? It’s like three card Monty.

  44. varro says:

    @kingmanic: Yes…I am not anyone’s bankruptcy attorney, or anyone’s attorney, period, unless you know me IRL and have signed on with me.

  45. nsv says:

    I see one case where this might be a good thing for the OP: if he has the cash on hand to pay in full, and wants to start improving his credit score. Get the card, mail the check (certified!) immediately–don’t wait for the bill–and verify that the balance is paid. Then use the card for a small purchase or two each month, and write and mail the check IMMEDIATELY for that purchase.

    His score might take a hit when he opens the account (and again when he closes it, which would be the wise thing to do before the annual fee hits,) but it would get rid of the debt and start building some history.

    But that assumes sufficient cash on hand to start, and almost anal retentive responsibility in managing the account for a year. It could work, but it’s a risk.

  46. I don’t see how hard it is to pay Best Buy a $1364.22 debt, unless you live on minimum wage. And if you’re on minimum wage you shouldn’t have that laptop/flatscreen/whatever costs that much at Best Buy.

  47. ClickClickThud says:

    Dear OP:

    They. Are. Trying. To. Screw. You.