Will You Still Be Able to Get Credit Cards After Bankruptcy? Find Out Here
For many people just coming out of their bankruptcy proceedings, a common question in this hire purchase society is whether or not you will be able to immediately obtain credit cards after bankruptcy. The simple answer is no. You will not be able to get the typical unsecured credit cards after bankruptcy, at least not until a couple of years after anyway. There will be those with ludicrously high interest rates, of course, who will offer anyone a credit card, though given the financial problems you have just rectified, it probably is not a good idea to go ahead and get in anymore problems!
One credit card type you really should avoid at all cost is one that claims no credit check. The interest rates on these are invariably absolutely huge. The credit limit tends to be around $300, but, despite claiming no set up fees, the small print will usually stipulate lots of difficult to understand fees, which are then applied to your balance immediately upon taking the card out, leaving you usually with around $100 credit! This is a bad idea and could lead to you finding yourself in more trouble.
In terms of credit cards after bankruptcy however, secured credit cards are a great way to go. Essentially, many banks now allow you to deposit funds into a savings account and your credit card is secured against those funds. Your credit limit is whatever you put in there. Making regular repayments to a credit card of this sort is a great way to be able to go about improving your credit card as well and for that reason, this can be a very good thing to do. If you want to extend your credit limit, just add more money to the savings account! That way you get a credit card and bank knows you have collateral backing it up.
Credit After Bankruptcy – Is Unsecured Or Secured the Way to Go?
If you’ve recently filed bankruptcy, then your best option will be to apply for a secured bank credit card. If time has passed since your discharge and your credit scores are above average, an unsecured bank credit card could be in your future.
If you filed Chapter 13, your options are limited to what your state and your trustee will allow. Ask your trustee. And of course, once you’re discharged, you may do as you wish. Let’s make sure you understand what I mean by, “bank credit cards.”
When I say, “bank credit cards,” I mean cards with a Visa™ or MasterCard™ logo. These cards are generally issued by national banks, but a credit union or small community bank often offer them as well.
Unsecured or Secured – There Is a Difference!
An unsecured card works like this – you apply, you’re approved (if you meet their credit guidelines), they assign you a credit limit, and mail you a card. With a secured card you apply, you’re approved (if you meet their credit guidelines), you mail in a deposit, and your deposit becomes your credit limit.
I’m an advocate of secured cards, especially for people just starting out after bankruptcy. However, if you’ve been following me for a few years, it might be time to turn the page and begin a new chapter in your recovery after bankruptcy, by applying for an unsecured bank card.
There are primarily two types of unsecured bank cards – low limit and normal cards.
Low limit unsecured bank card applications are the kind that fill up your mailbox after your bankruptcy is discharged. These cards are usually from lenders who understand the risk a bankrupt person poses to other banks, and have figured out a way to profit from it.
In fact, recent bankrupt people aren’t very risky for them at all. Here’s why:
- They know that you can’t file bankruptcy again for many years.
- They only extend very small lines of credit (which can vary from $300 to $1,500).
- They hit you with upfront fees that make the card less appealing.
- They usually have “risk-based” APRs that can be well above the average rate.
The Brass Ring
The real prize is normal unsecured cards. You can tell a normal card from a low limit card pretty easily. They are usually from reputable banks or credit unions; have much higher limits and the interest rates are considerably lower. When recovering after bankruptcy, normal unsecured bank cards are the brass ring, baby.
The Key to Getting Approved for an Unsecured Bank Card After Bankruptcy Is to Apply With the Right Bank.
Getting approved for a normal unsecured bank card has a lot to do with knowing a bank’s appetite. Yes, I said, “appetite.” I discovered this the hard way back in 2001 when I was trying to finance my first commercial building. Bank after bank told me, “No” even though my credit reports yelled, “Yes!”
Here’s what I discovered: I applied with the wrong banks. I was applying for credit with banks that didn’t have an appetite for large commercial business loans at the time. When I realized this mistake, I quickly adjusted my game plan. I immediately found a commercial loan broker who located a hungry bank, applied and received loan approval within 11 days! (TRUE STORY!)
Avoid making the same mistake I did. Don’t randomly apply for unsecured bank cards. Find the hungry unsecured credit card lenders. Apply. Get approved.
How to Choose the Right Credit Card Type For Your Needs
While credit cards offer various benefits to all cardholders, choosing the right credit card type makes all the differences. There are two types of credit cards available today.These are secured and unsecured.
Unsecured
The large majority of cards being offered today are categorized under unsecured cards. This card type is offer to individuals who have a great payment and credit history. Unsecured cards are excellent because it offers cardholders a host of benefits such as cashless purchases, household and mortgage bills payments.
However, they have a certain amount of usage limit. Because there is a fixed limit on the amount of credit you can have, you need to keep your purchasing in check to ensure you do not exceed the imposed limit.
Secured
This credit card type is issued once a certain amount of money is deposited into the bank account of the card issuing company. Secured cards normally come with a fixed guarantee and have low limits of spending. The limits of spending will depend on the amount deposited as guarantee. These are given to people who have bad credit history and people with unverifiable employment status.
Additionally, secured cards may come with extra expenses such as annual maintenance fees, higher interest charges, and unlike unsecured cards, it comes with application fees. The only problem with secured cards is that it lulls cardholders into a false sense of security and encourages people with an already bad credit history to keep spending money.
That said, secured cards do offer a measure of comfort. If you are unable to make payments, the card company can simply deduct the payments from the guaranteed deposit you provided.
Whichever card type you choose, always make sure that you take your time researching on the different types of cards. Turn to the internet to get all the information you need. Additionally, it is best to start comparing to determine the right card for you.
Of course, before you start credit card comparison, make sure that you are using a trusted comparison site in order to obtain the most accurate reviews and information. All you need to do to start comparing is to choose which ones you think are best suited for your needs and demands and compare them side by side.