One of the most common recommendations for post-bankruptcy debtors looking to rebuild their credit is that they get a secured credit card. But all secured credit cards are not created equally.
Below are a few questions you should ask before you sign up for a secured credit card after you exit bankruptcy:
- How much of a deposit is needed? Most secured credit cards ask for a $300 to $500 deposit from debtors looking to rebuild their credit after bankruptcy. But some secured credit cards may ask for a bigger deposit.
- How much credit will they issue me? Many secured credit cards will only allow you a credit line up to the amount you deposit with them; but as you prove that you are creditworthy by paying your bill every month the amount of credit issued will begin to exceed your deposit amount. This increase in credit is especially helpful to debtors trying to rebuild their credit after bankruptcy.
- How much is the interest and fees on the secured credit card? This is where the good and bad secured credit cards part ways. You really want to avoid any secured credit card that has a very high interest rate or annual/monthly fees. Or, if they have fees they should be very small. Some secured credit cards attempt to make their profits from the fees they charge their customers so be very careful after exiting bankruptcy and make sure you choose wisely.
- How long will it take to get an unsecured credit card? It usually takes about a year of making regular payments to qualify for an unsecured credit card; but every secured credit card issuer is different.
- How much interest will my deposit earn? Your deposit will earn whatever the going rate is for a savings account. You should ask the credit card company to get a specific interest rate.