Most can agree that building your credit after bankruptcy is important; but there are sometimes disagreements on how to achieve that goal. We have already mentioned that getting a secured credit card after bankruptcy is a great way to build credit and pave the road to getting an unsecured credit card within a year or two. But what about retail credit cards? Retail credit cards can be easy to get; but are they worth the trouble?
We say not really, here's why:
- Retail credit cards are an expensive form of credit that doesn't really offer the flexibility that an unsecured (or secured) credit card offers. You can't use your retail credit card to book airline tickets, a hotel or rent a car. The usability of a retail credit card is extremely limited because it can only be used for the products offered by that retailer.
- Retail credit cards have really high interest rates compared with other credit cards. Even if a debtor has really good credit they can face an interest rate as high as 20 percent on their retail credit card. On the other hand, good credit can win a debtor unsecured credit cards with very low interest rates in the general credit card marketplace.
- Some retail credit cards have clauses in them that allow them to repossess an item if you fail to pay your credit card bill. We all intend to pay our credit card debt when we charge an item; but why take the chance of repossession if you don't have to? The best option for post-bankruptcy debtors is a secured credit card and eventually an unsecured credit card that is not attached to a retail chain.