One of the first tools post-bankruptcy debtor uses to rebuild their credit score is the credit card. While they may start off with a secured credit card, within a year of making regular payments post-bankruptcy debtors can graduate to unsecured credit cards. But what are some of the important facts debtors coming out of bankruptcy need to look at before choosing a credit card?
Let's take a look at a few:
- Post-bankruptcy debtors should take a look at their credit limit on the credit card before they apply. A low credit limit on your credit card will require that you avoid spending too much on the credit card. Credit cards which are maxed out could negative impact your credit score.
- What is the credit card's APR or annual percentage rate? The APR is the interest charged on debt which you have not paid off during the grace period. Post-bankruptcy debtors should try to avoid high APRs and avoid carrying a balance.
- Is your APR fixed or variable? Unfortunately many subprime credit cards have variable interest rates. For debtors exiting bankruptcy, finding a fixed interest rate credit card could be most beneficial especially considering the possibility that interest rates may go up.
- How long do you have before interest accrues? The grace period is especially important for post-bankruptcy debtors who want to avoid interest charges. Some charge cards, such as AMEX have no grace period, so be careful. And never assume that a grace period is 30 days, some credit cards have grace periods of only 20 days.