Recovering from bankruptcy can take time, but for many, using secured credit cards could help repair your credit and set you up for success later on. But what are they, and how do you choose the right one? Let’s dive into what you need to know before obtaining a credit card post-bankruptcy.
What Is a Secured Credit Card?
A secured credit card is a type of credit card that’s “secured” with your own money. The bank holds your money as collateral and extends credit to you. Many people struggle to find credit after bankruptcy, and a secured credit card limits the creditor’s risk since you have the funds available to pay off the card’s balance.
Except for this difference, secured credit cards operate the same way as traditional credit cards. A bank charges you interest on the balance and expects you to make payments on time. They also report to credit bureaus. This makes them a powerful tool for rebuilding your credit.
What Is a Prepaid Debit Card?
A prepaid debit card is a card you can put money on and use to pay for items at the store. But prepaid credit cards aren’t tied to a bank account, they don’t use credit from the bank, and they don’t report your spending to credit bureaus. That means they don’t affect your credit score, and they don’t help you rebuild your credit when you need it.
Choosing a Secured Credit Card
A secured credit card post-bankruptcy can be an important tool for rebuilding your credit. But what is the best credit card for bankruptcy and what should you look out for? Although sites like WalletHub provide overviews of secured credit cards, it’s always essential to review the terms of a credit card and what it could cost you.
Key items to look out for include:
- Fine print. Review any terms attached to a credit card before you agree to it. The fine print will detail the exact terms for the credit card, what the bank will charge, and how it could affect you.
- Interest rates. These rates vary significantly between cards. It’s worth considering how much you may put on your credit card each month, what your payment plan will be, and how much you could end up spending on interest.
- Monthly or yearly fees. This is another cost that varies significantly between cards. Some have high fees while others have none.
- Reputation. Well-known and respected lenders protect their reputation, and they may offer good communication and support. Before getting a card, make sure you know who you’re doing business with.
Contact Our Texas Bankruptcy Lawyer for More Information
If you need more information about secured credit cards after bankruptcy, contact Erin B. Shank now. Erin and her team have helped people throughout Central Texas with bankruptcies and beyond for nearly 40 years. With so many satisfied clients, you can rest easy knowing you’re working with an experienced bankruptcy attorney.
For a free case evaluation, get in touch with Erin B. Shank, P.C. now.