Credit Cards After Bankruptcy

Credit-cards

Secured Credit Cards – Why would you wish to consider setting up a secured credit card? I discuss a few of these reasons in this, this and this blog. The reason is quite simple – You wish to rebuild your credit scores and reestablish your credit reputation following a personal financial disaster.

Those who read my posts know I am favorably predisposed toward credit unions for consumers. So it stands to reason I would lead this list of secured credit cards with that which is offered by my own credit union.

With my credit union, as with most, there are no fees. The interest rate is fixed at 7.90% (the effective rate is actually 7.40% as we earn .50% on our pledged/secured savings). The way it works is the member pledges 110% of the requested credit limit. For example: The member pledges $1,100.00 in savings for a credit card with a limit of $1,000.00. The credit history you establish with your secured card is reported to the credit bureaus. As previously posted you, too, are eligible to join your own credit union.

Applied Bank© offers a secured Visa© with a fixed rate of 9.99% and no fee. This is a 100% pledge of savings to credit limit. So for a credit limit of $1,000.00 the customer must pledge $1,000.00. On average, the current savings account rates are paying .48-.50%. As of publication, this return is true with most similar savings accounts in the country. Shop the Applied Bank offers (and others) with care, while one has no fee, another of their secured cards has an annual fee of $119.00 and may have higher rates.

Amalgamated Bank of Chicago© secured Master Card© has an adjustable rate ranging from 9.25-14.25%. The annual fee is $50.00. As with the other bank secured cards, they offer a 100% pledge of savings to the credit limit.

Capitol One© Secured Master Card© has an annual fee of $29.00 and an adjustable rate of 22.90%. Here also the customer pledges 100% of a savings account deposit of the credit limit.

Last but not least of this group is the Orchard Bank© VISA© Card. The fees are not disclosed unless one applies. As discussed below, hard credit inquiries scratch and dent your credit scores. Their adjustable interest rate varies 7.90-19.90%.

A good source to search for the smaller limit secured cards is bankrate.com. On a recent search I found these as the featured cards. You may note that some have no fee but a higher rate. Another has a low rate but a high annual fee. I do not endorse any of these cards. Nor do I demean them. They are what they are. Finally, you may wish to do your own search for the latest offerings.

Another good source for information on starter or restarter credit cards is: My Bank Tracker.

Unsecured Credit Cards – There are very few unsecured credit cards available within 5 years of bankruptcy. Given there is such limited competition, you will pay outrageous fees and rich double digit interest rates. There is no advantage to your credit report and credit scores by having such a card. A Secured Card will be reported to credit rating agencies exactly the same as an Unsecured Card. You may shop for unsecured cards on the Internet but be prepared to pay outlandish fees and absurd interest rates.  Hard credit inquiries are reported against your credit scores. Use great caution when you go to the sites offering free credit scores as many of them have very weak security and pose a great risk to your privacy. As always keep in mind TANSTAAFL.

Read your contract with the provider of the credit card. Know what’s in your wallet.

A Debit Card is simply a plastic check. It is linked directly to your checking account. Of and by itself it offers no benefit to your credit. To have credit with your debit card, you must qualify for overdraft protection which is an unsecured line of credit and reported on your credit report as a revolving (credit card) account. Debit cards don’t have the security of credit cards as is illustrated in this ABC News report. Use due caution with debit cards. In the catch phase of a ‘60’s TV show: Danger.

Art Credit: Google Images

Financially SpeakingJames Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | July 6, 2011 | Updated August 24, 2014
 
 Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing full attribution is given to James Spray.

13 comments on “Credit Cards After Bankruptcy

  1. Thanks James. I am also working on a site dealing with bad credit and secured/unsecured loans. I’d like to share your post on my site, with your permission of course. I look forward to hearing from you. Thanks again.

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    • James Spray says:

      Thank you for your correspondence and request. Given we are on the eve of monetizing my blog my agent will not allow me to grant sharing rights to anyone. Should you wish to purchase advertising on my blog, you can reply to this email with your request and I shall certainly forward it to my agent/attorney with a request that you receive expeditious attention.

      Thank you for your interest.

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  2. James Spray says:

    Major card issuers now looking at lower scores –
    http://tinyurl.com/cw9pqz6

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  3. James Spray says:

    How Chase Ripped Off Its Own Credit Card Customers: via HuffPost http://huff.to/NJMAo3

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  4. Paul says:

    Hi James. Thanks for all the info. I’m going to follow up with you separately regarding our mortgage situation. For now, I know one of your posts mentions getting a secured card at a couple of different credit unions…and adding a spouse to the card(s) as well. However, I can’t seem to find that entry. (don’t see it in Credit Union Power, Rebuilding after Bankruptcy, Credit Cards after Bankruptcy, etc.) Can you point me in the right direction? Also, it looks like Coors Credit Union no longer has the secured card option on their website. In Colorado, Elevations and Partner Colorado have no-fee secured cards at the moment.

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    • James Spray says:

      Hello Paul – Kindly clarify for me what you wish me to do to help you? Thank you.

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      • Paul says:

        Hi James. My apologies for not being clear. One of your posts talked about the number of secured cards we should get and the best way to add a spouse (Authorized User or Joint/co-applicant). I was hunting for that blog entry again, but no amount of searching will bring it up. I was hoping you could point me to the proper entry so I could read it without wasting too much of your time with questions (…the best laid plans…). We’re trying to rebuild our scores quickly, and we want to be sure we have an optimum number of secured cards and the proper links to each other for maximum benefit. Additionally, we didn’t reaffirm our single auto loan (with Chase), and I’m thinking about getting a secured share loan from the credit union to pay off the car. Do you think this type of loan is a good idea to avoid any chance of a repossession? Thanks for your time.

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      • James Spray says:

        Thank you, Paul, your clarification helps. To your question on the auto loan: I don’t have enough information to properly advise you. So to general issues: If your credit union will refinance your auto and if it is valuable and economical for you to so do it seems to be a basic business decision. There is clearly a reason you elected not to reaffirm your auto loan so not knowing the reason, I cannot in good conscience suggest you refinance. However, it is helpful for your credit to have a good mix of credit which includes an installment loan.

        Given your mention of having sufficient cash (reference to shares secured) to payoff the current car loan, would you be better served using that cash for a down payment to purchase a new or newer vehicle utilizing an installment loan from the credit union? What is your most prudent decision? You know better than me.

        On credit cards, to be frank, I don’t recall a specific post* such as that to which you refer. It’s likely this information is spread through several posts as credit cards are discussed with some frequency in relation to reestablishing credit in my posts. As to specifically where to obtain what for whom, how and when; this is information tailored to and available for my clients upon individual consolations. Generally speaking one needs to have at least three credit cards in use. Four is probably best but not absolutely necessary. The proper usage is the key. With improper usage of revolving credit, one will be worse off.

        Best wishes for success,

        Jim

        * Should you or another reader surface the post you referenced in your below comments, kindly let me know the title.

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  5. Paul says:

    Hi James. Thanks for the reply. We didn’t reaffirm because our attorney never discussed it with us, the loan holder never sent us any information on it, and we didn’t investigate it on our own either. Unfortunately, I’m learning a few things about the bankruptcy process after the fact. I wish I had found your blog earlier. We probably put too much faith in the advice of counsel, but we didn’t have a reason to suspect that advice was incomplete. Even BofA never asked contacted us about reaffirmation. We didn’t hear the term till BofA transferred our mortgage to a new company…the same month our 13 converted to a 7.

    I’ll keep an eye out for the post in question, and I’ll move further questions to you directly. We are interested in working with you on the mortgage front, but it looks like we need to wait at least 12 months.

    Thanks again for your assistance,
    Paul

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    • James Spray says:

      Paul –

      I am most curious, what causes you to think it’s necessary for you to wait another year for a professional consultation with me? Fear not learning more facts about your situation – facts are much better than illusions. My clients tell me that once they know the facts, the better equipped they are to deal with the situation at hand – whatever that may be.

      Best thoughts –

      Jim

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      • Paul says:

        Jim,

        Agreed. I meant that, from your posts, I understand that we can’t refinance our FHA mortgage for at least a year following our 7 discharge. I definitely want to talk with you sooner to make sure we’re making the right choices now to give us the best options down the road. Sorry to highjack the thread.

        Regards,
        Paul

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      • James Spray says:

        I look forward to talking with you in person, Paul.

        Best thoughts,
        Jim

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  6. […] of this blog most often read Credit Union Power and New Credit During And After Bankruptcy, […]

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