This article discusses how to get a credit card after Chapter 7 bankruptcy. It is always very tough to get a credit card after bankruptcy. This is because most lending institutions believe that it resulted from overspending. Do not worry, we have details some steps that can help you get a credit card and build a very good credit.
Even though your credit record can show bankruptcy for up to 10 years. In this article, you will learn how to make good credit after the bankruptcy.
Many financial institutions are always eager to lend to people emerging from bankruptcy that they keep marketing to them while they are still bankrupt. Credit card companies, local car dealerships, and furniture stores still send them messages. Be careful, most of their terms are very exorbitant.
Why Credit Card Companies Are Eager to Lend to Chapter 7 Bankruptcy Debtors
Many banks still give credit cards to people who just emerged from Chapter 7 bankruptcy due to the following reasons.
- A debtor just discharged thousands of dollars in debt, which frees up resources (i.e. income) that can be used to pay back a new credit.
- The creditor can charge a higher interest rate.
- The financial institution cannot fill for another bankruptcy for some time. For instance, if you received a discharge in a Chapter 7 case, you can’t receive another Chapter 7 discharge for eight years.
Types of Credit Cards You Can Qualify for After Filing Chapter 7 Bankruptcy
Most of the credit card you’ll consider will be one of two types, secured or unsecured.
Get a Credit Card After Chapter 7 Bankruptcy ; Secured Credit Card
The secured credit cards are just debit cards. You must deposit a sum of money into a special savings account with the institution before you use the credit card for purchases. That deposit amount is usually equal to the lending limit the institution will allow on the account. The amount is the lender’s collateral. If you default in the future, the lender has nothing to lose.
If you consistently pay on time, many companies will allow you to convert a secured card to an unsecured card with a higher credit limit.
A secured credit card has a lower interest rate than any unsecured accounts you can qualify for right after bankruptcy.
Below are a list of Secured Credit Cards you can apply for.
Get a Credit Card After Chapter 7 Bankruptcy ; Wells Fargo Secured Credit Card
- Annual Fee: $25
- Limit/Deposit: $300 will get you a credit limit of $300
- Perks: Roadside assistance and cell phone damage protection
- APR: 20.24 percent
First Progress Platinum Prestige MasterCard Secured Credit Card
- Annual Fee: $44
- APR: 11.99 percent
- Limit/Deposit: 200 to $2,000
- Perks: Lower annual interest rate than most
Capital One Secured MasterCard
- Annual Fee: None
- Perks: Security deposit can be less than credit limit, and you can pay it in installments; roadside assistance; car rental insurance.
- APR: 24.99 percent
- Late Payment Fee: Up to $39
- Limit/Deposit: $49 to $200 depending on creditworthiness
Unsecured Credit Card
When a card is unsecured, it means no security or collateral (i.e. the deposit). If you default on your payments, the credit card company has nothing to apply against your balance. So, they’ll come after you personally if you fail to pay promptly.
You can apply for the
Credit One Bank Platinum Visa
- Annual Fee: $0 to $75
- APR: 16.99 percent to 24.99 percent.
- Perks: 1 percent cash back on gas purchases
- Limit: Initial limit will be $300 to $500 depending on creditworthiness
Milestone Gold MasterCard
- Annual Fee: $35 to $99
- APR: 23.90%
- Perks: Choose your custom card design.
- Limit: $300
Be very careful about the followings;
The interest rates of the financial institutions are usually very high. Majority of them are 20% and above.
Many card issuers demand very exorbitant fees such as;
- Set-up fee
- Transaction fee
- Administrative fee
- Application fee
They give you a certain credit limit and charge you more than half of amount as fee the moment their application is accepted. Pay the fees as soon as possible, but if not, you will be paying even more in interest charges. The financial institution always wins.