Marketing strategists have done a lot to improve the image of secured credit cards, but there is still no consensus in the industry on how to report such cards to credit bureaus.
Most card issuers say consumers won't find the cards appealing if their secured status must be highlighted when account information is sent to credit bureaus.
Those issuers argue that consumers would feel stigmatized if a secured card, which is marketed as a way to repair a damaged credit record or simply to establish a credit record, were to show up on their credit reports.
Until 18 months ago, credit bureaus hadn't given the issue much thought.
In fact, card issuers did not even have the option of identifying their secured cards on the standard credit reporting form, called the metro tape.
But since early last year, the three credit bureaus have been gently prodding their customers to use a new category on the metro tape that allows issuers to denote secured credit cards.
Last year Equifax Inc. contacted leading secured card issuers twice in an effort to encourage them to distinguish between their unsecured and secured card accounts.
The answer the Atlanta-based credit bureau got was "thanks, but no thanks," said Lee Lovern, vice president of credit information services for Equifax.
Mr. Lovern said that Equifax will continue to "campaign periodically," to persuade issuers to report such information.
Only a handful of issuers are doing so, including People's Bank, Marine Midland Bank, and Wells Fargo.
And Banc One Corp. plans to start reporting secured cards by June 1.
"Our obligation is to report accurate information," said Stephen Landry, vice president of consumer credit services, Wells Fargo. "If a lender does not know that a potential customer has a secured card," he added, "it cannot completely make an informed decision," about giving that person credit.
In the meantime, consumer advocates have caught a whiff of the controversy and are doing their best to inform the public, even though they, too, are divided about whether reporting such information is harmful to consumers' credit.
For example, Bankcard Holders of America, McLean, Va., tells its members which card issuers report secured cards to the credit bureaus.
Ruth Susswein, executive director of the consumer advocacy group, sees the issue as a matter of privacy. Consumers should know, she argues, that they are losing a privilege if they apply for a secured card from issuers that report their secured status.
While the debate lumbers on, advocates of reporting secured cards contend that issuers should provide the most accurate information possible and let the market determine whether secured cards will ultimately penalize consumers.
So far there is no evidence that it does, since most issuers report secured cards to credit bureaus as an unsecured line of credit.