Using a secured credit card after bankruptcy might not be a bad idea...

Secured Credit Cards After Bankruptcy

Although recent bankruptcy filers are actually a good credit risk, it might be difficult to open a credit card account on reasonable terms after declaring bankruptcy. Often, banks will try to charge all sorts of fees and high rates of interest. While having use of a credit card is convenient, it’s not worth getting hosed by the credit card companies all over again.

Nonetheless, accessing credit responsibly is one of the first steps on the road to financial recovery. So, what to do if you find yourself struggling to get a good credit card after bankruptcy?

Enter the Secured Credit Card…

Consider using a secured credit card. Secured credit cards require opening a savings account, the balance of which matches your credit limit (if your savings account balance is $1,000, that’s your credit limit on the secured credit card). If you’re late making a credit card payment, the bank takes it out of the savings account. When hunting for lenders who offer secured credit cards, try your local credit union. According to Bankrate.com, about half of the nation’s credit unions offer secured cards to their members. When applying for a secured credit card, be careful. Almost all secured cards charge an annual fee that can vary widely. Also, look for a card that doesn’t charge an application fee. When in doubt, call an attorney to review the card agreement with you.

Rebuilding Credit

Secured credit card accounts can be a positive step towards good financial habits after bankruptcy or major life event. They promote responsible use of credit by reminding consumers that, yes, you’re actually spending money when the card is swiped. With responsible use of a secured card for 9-12 months, it’s likely that lenders will begin to offer the use of a more conventional credit card on somewhat acceptable terms.

Still Not Convinced?

Keep in mind that consumers are only eligible for a chapter 7 discharge every eight years. If you’ve recently declared bankruptcy, credit card companies know you won’t be able to shake them again in bankruptcy court for quite sometime. As a result, you’re likely to receive offers in the mail for credit cards.

As we’ve mentioned, the terms might not be favorable, but if the idea of a secured credit card sounds unappealing, try shopping around for a new credit card that offers reasonable interest and fees.

If you must jump into the credit card ring right away, be sure to pay off your balances every month in full. It’s time to start over and rebuild your credit.