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Should I Get a Secured Credit Card After Bankruptcy?

After a bankruptcy, it’s not only a good idea to get a credit card to start rebuilding your credit, it’s absolutely necessary. Unless you start rebuilding your credit, it will be difficult, if not costly, to obtain auto loans, rent an apartment or house, or eventually get a mortgage.

When you first obtain a bankruptcy discharge, your credit score is going to take a hit, however, if you’re like most bankruptcy filers, your credit was not that good when you filed for bankruptcy. If you had any late payments and collections before the bankruptcy, your FICO score was already suffering.

Can You Get a Credit Card After Bankruptcy?

“If I file for bankruptcy, will someone give me a credit card?” Believe it or not, it’s not that difficult to get a credit card after bankruptcy. Usually, though, the credit limits start off low, for example, around $300, there may be an annual fee, and the interest rate is usually high. Since credit cards can be expensive after bankruptcy, we recommend taking the time to shop out the different offers available online.

One alternative to a traditional credit card after bankruptcy is a secured credit card. With a secured credit card, you’ll deposit a certain amount of money into a savings account at a bank and the bank will freeze the account while you use the card.

The credit limit on a secured card could be as low as 50% of the amount you deposit to as much as 120%, though that’s more common with promotional incentives. For example, if you deposit $500 into the account, your credit limit may be as little as $250 or it may be as high as $600. If you plan on applying for a secured card, read the cardholder agreement very carefully before you decide on a card. Banks and credit unions vary, so you could be required to deposit anywhere from a few hundred dollars to a few thousand dollars.

Why Consider a Secured Card?

After bankruptcy, debtors don’t usually have any trouble getting traditional, non-secured credit cards, only their terms are not very attractive at first. As time goes by and as the debtor rebuilds their credit, they will qualify for more attractive credit terms. Beware, secured cards, in particular, can come with hefty application and processing fees, high-interest rates, and sometimes no grace period.

Essentially, the only reason why someone should go with a secured card is if they can’t qualify for an unsecured card because their credit is in that bad of shape. Otherwise, most bankruptcy filers are better off with unsecured credit cards when they have the choice. Still, it’s important to take your time and shop out the best credit card offers.

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