Taking out a credit card after bankruptcy may seem like a huge risk, but this step could actually be crucial in helping you recover. After all, having a credit card will give you the ability to prove your creditworthiness and have all of your credit transactions reported to the three credit bureaus. With enough positive reports on your credit reports, you will have a chance to overcome bankruptcy and get a fresh start on your finances.
Unfortunately, card issuers aren’t necessarily keen to extend a line of credit to people who have gone bankrupt in the recent past, which is why bankruptcy credit cards tend to be rare. However, credit cards for bankrupt people do exist if you look closely enough. Cards in this niche tend to be secured credit cards instead of unsecured, which means you will need to put down a cash deposit as security to get started.
Should You Get a Credit Card After Bankruptcy?
If you’re hoping to rebuild your credit and finances after bankruptcy, a credit card can help. Not only do bankruptcy credit cards allow you to add a positive history to your credit reports, they can also help you relearn positive financial habits.
The key to getting the most out of a credit card after bankruptcy is to avoid mistakes or problems you’ve had in the past. Having filed for bankruptcy means you experienced financial hardship and found yourself in a situation where you couldn’t pay your bills. If you are considering a credit card now, in your new post-bankruptcy life, it is crucial to make sure you are using a credit card on the right way from the beginning.
What does it mean? In most cases, this means that you will only use your bankruptcy credit card for purchases that you can afford to pay immediately. Additionally, you should strive to pay your bill earlier or on time each month, and you should refrain from using plastic as a short-term loan.
Remember that credit cards – and especially credit cards for bankrupt people – often charge exorbitant interest rates that make maintaining a balance costly. To get the most out of credit cards after bankruptcy, it’s important to cultivate a new mindset about debt and only use credit for purchases you can afford to pay with cash.
What’s the Best Credit Card After Chapter 7 Bankruptcy? Or chapter 13? Consider these top four options that can help you rebuild your credit and get on with your life.
Discover it® secure credit card
the Discover it® secure credit card is our top recommendation among bankruptcy credit cards because of the limited fees you will face and the rewards you can earn. This card does not charge an annual fee or foreign transaction fees. You’ll also avoid late fees on your first late payment (after that it can reach $ 40) and you’ll receive free access to your FICO score on your monthly credit card statement each month.
In terms of rewards, this card distributes 2% cash back on up to $ 1,000 of combined spending at gas stations and restaurants each quarter (then 1%), as well as a 1% cashback on all other purchases. Discover will also match any rewards you earn after the first year.
Best starter card
Capital One Secure Mastercard®
the Capital One Secure Mastercard® is another secure credit card with no annual fee, and it’s easy to start with an initial deposit as low as $ 49, $ 99, or $ 200, but it can be paid in installments ($ 20 minimum) within the first 35 days of your request. Also note that Capital One will automatically consider you for a higher line of credit in as little as 6 months with monthly payments on time.
This card does not offer any rewards, but you avoid paying transaction fees abroad. Cardholder benefits include fraud coverage, emergency card services, and Mastercard identity theft protection.
Best without credit check
OpenSky® Secured Visa® Credit Card
If you are concerned that you may not be approved for bankruptcy credit cards, the OpenSky® Secured Visa® Credit Card should give you a lot of peace of mind. This secure credit card doesn’t even check your credit when you apply, which means almost anyone can be approved.
This card comes with an annual fee of $ 35, and you’ll pay an overseas transaction fee of 3% on purchases made outside of the United States. However, you can start with an initial deposit as low as $ 200 and your credit movements will be reported to all three credit bureaus.
Ideal for balance transfers
UNITY® Visa secure credit card
This card charges an annual fee of $ 39, but you can get an initial credit limit starting at $ 250 and your payments will be reported to all three credit bureaus. What sets this card apart is its ongoing interest rate and introductory balance transfer offer, which could save your life if you have to escape high interest debt.
Once you have registered for the UNITY® Visa secure credit card, you will benefit from a fixed APR of 17.99% on purchases. However, balance transfers qualify for an introductory APR of 9.95% for six months, followed by the standard fixed interest rate of 17.99%. Note that a 3% balance transfer fee (minimum $ 10) applies.
How to choose the best credit card after bankruptcy
For the most part, you will be limited in terms of credit card options after bankruptcy. Most of the credit cards you’ll be eligible for will be secured credit cards, which means you’ll need to make a cash deposit to get started.
However, you must remember that credit cards for bad credit doesn’t have to be forever. The purpose of a bankruptcy credit card is to give you the opportunity to prove your creditworthiness again. Eventually, you should be able to improve your credit score and switch to a credit card with better benefits and rewards.
As you consider all of the card options available to you right now, here are the top factors you should weigh and compare:
- How much can you afford for an initial deposit? Some secured credit cards require a higher initial deposit than others. Be sure to consider how much you can afford to put as collateral, then compare cards that offer reasonable initial deposit requirements.
- Want to earn rewards? Some secured credit cards offer rewards as a percentage of your purchases, but these rewards often cause consumers to spend more than expected. Our advice? Only sign up for a card that allows you to earn rewards if you are sure you can pay your balance in full each month.
- What is the current APR? Know and understand the current APR you will be charged if you carry a balance. Also note that some secured credit cards charge considerably higher interest rates than others.
- What fees will you have to pay? Finally, watch out for annual fees, monthly maintenance fees, and other hidden charges that bad credit credit cards often charge. Ideally, you will go for a card with little or no charge.
What you need to know about credit cards after bankruptcy
Will you be approved for a credit card as a result of bankruptcy?
A Chapter 7 bankruptcy can stay on your credit report for 10 years, while a Chapter 13 bankruptcy typically stays on your credit report for 7 years. During this time, it can be difficult (but not impossible) to get credit card approval.
You will have the best chance of getting a credit card approved after bankruptcy if you spend time improving your credit score before you apply. If you are able to move the needle and get your FICO score in the “fair” range (580 to 669), for example, lenders and card issuers may be more willing to endorse you for their products. Want too See if you prequalify without affecting your credit score? Check out our CardMatch functionality and get a card that best suits your needs.
How Long After Bankruptcy Should You Apply For A Credit Card?
You can apply for a credit card right after bankruptcy, but you will need to be realistic about what type of credit card you may qualify for. Generally speaking, you will have a better chance of getting credit card approval for bad credit after bankruptcy. You may also want to consider a secured credit card that requires a cash deposit as security, as this card is considerably easier to obtain.
How a credit card can help you build your credit
A credit card helps you create credit on the basis of the simple fact that all of your movements are reported to the three credit bureaus – Experian, Equifax, and TransUnion. Once you are approved, you will slowly improve your credit score if you use your credit card responsibly. For example, make sure you pay your credit card bill early or on time each month. In the meantime, strive to keep your credit usage below 30% for the best results. This means maintaining a balance of $ 3,000 or less for every $ 10,000 of available credit you have.