Credit Cards After Bankruptcy - How To Choose The Right One

Anyone who has gone through difficult financial situations knows that it can be nearly impossible to obtain credit cards after bankruptcy.  Lenders rarely, if ever, want to take a risk on those who have not managed their credit successfully in the past.  If you find yourself in this dilemma have no fear!  There are some great options for you to consider.

Where Should I Start in Looking for Credit Cards After Bankruptcy?

The best place to start is to look for a lender who offers a secured credit card product.  What does this mean?  Well, some lenders will offer you a credit card that you secure by placing money in an account that the lender will have access to in case of difficulties.  In other words, you may be able to obtain a credit card with a $500 limit if you are willing and able to place $500 in a savings account.

This might not make sense on the face of it – if you have $500 in cash to put in a savings account, why would you need a credit card with a $500 spending limit?  The main reason to pursue this type of card is that it lets you reestablish your credit history.  If you maintain a positive payment schedule with this type of card, you will demonstrate your commitment to smart money management.

Are There Any Risks to Secured Credit Cards?

While a secured credit card might be one of the best solutions to the problem of obtaining credit cards after bankruptcy, you will want to carefully consider your options.  Look at all secure credit card products with an eye toward some of the following:

• Interest rates:  Be sure that your secure credit card does not charge ridiculously high interest rates.  Otherwise, you’ll be paying a high cost for the benefit of boosting your credit score.
• Fees (for application and on purchases, transfers or cash advances):  The fine print on any credit offer will tell you more about these potentially high fees.  Look for a card with limited, if any, associated fees.  At a minimum, do not pay an application fee.  There are many cards available without an application fee.
• Reporting to bureaus:  All your efforts to improve your credit will go to naught if the issuer you are dealing with does not report to the three credit bureaus.  Be sure to ask this question before signing up for a card.
• Conversion to an “unsecured” card:  After 12 to 18 months of on time payments on your secure card, your issuer should feel sufficiently comfortable with your credit management to convert your card to an “unsecured” card.  This means that your credit limit will be increased to a level beyond the amount in the savings account associated with the card. 

How Should I Use Credit Cards After Bankruptcy?

In a word, carefully!  Whatever you do, you do not want to miss payments, pay late fees or otherwise demonstrate that you are having difficulty managing your credit.  Charge a few small things every month and pay off the bill as soon as you receive it. 

If you follow these tips, you will soon find that obtaining credit cards after bankruptcy will be no problem at all.