The last thing most people want to think about after filing bankruptcy is getting a credit card, but in today’s economy it is almost impossible to do without one and it could help you to re-establish your credit. Here’s a breakdown of how they work and what to avoid.
Secured Credit Cards
Here’s how a secured credit card works. You deposit an amount with the credit card issuer and they issue a major credit card such as a Visa or MasterCard in your name. You can only charge up to the amount that you have on deposit, and there are monthly fees, but by charging a small amount every month and then paying it off in full every month, you can start to re-establish your credit. However, to make sure that you get the maximum benefit from a secured credit card be sure that 1) the card you choose reports your charge and payment history to the three major credit reporting agencies; 2) you make the monthly payments on time, every month, with no exceptions; and 3) only charge a small amount every month and avoid charging more than fifty percent of the limit each month.
After you have made timely payments on your secured credit card for six months to one year, and you are timely paying your normal household bills and any reaffirmed debt such as a mortgage or car loan, you will be able to move from a secured credit card to an unsecured credit card.
Unsecured Credit Cards
Some of our clients report receiving unsecured credit card offers after receiving their bankruptcy discharge, while other clients only receive these offers after they have established a payment history on a secured credit card. Either way, it is important to carefully consider any unsecured credit card offers that you receive. Read the fine print and make sure that the annual fees and interest rates aren’t excessive. If you aren’t sure whether the credit card offer you receive is valid, use the internet to check it out.
Follow the same rules as for secured credit cards – make sure that the card issuer will report your charge and payment history to the three major credit reporting agencies, that you make the monthly payment on time every month, and that you only charge a small percent of your limit every month.
Responsible use of a secured or unsecured credit card can help you to re-establish your credit, but it’s up to you to make sure that your charges don’t exceed the amount that you can comfortably pay every month.
If you have questions about whether bankruptcy might be for you, The Ballard Law Group offers a free initial consultation so that you can confidentially discuss your financial situation with an experienced Georgia bankruptcy attorney. Call (404) 800-9939 to schedule your free initial consultation at either our Lawrenceville or Atlanta location.