People experiencing financial distress often feel at a loss for how to beat the cycle of debt. If you have accumulated bills you cannot pay or are struggling under increasing debt, it may be a good idea to file for bankruptcy. However, filing for bankruptcy comes with the challenge of rebuilding credit. Whether it’s getting strict with budgeting, monitoring your credit score, or making payments on time, there are many ways you can start to get back in solid financial standing after a bankruptcy filing. Of these, one of the best strategies for rebuilding credit is to apply for a secured credit card.
If you have recently filed for bankruptcy, it’s in your best interest to work with a debt settlement attorney. A skilled lawyer can help you navigate the complexities of your credit situation and help you on the path to fixing your financial situation. Here is some helpful information about how secured credit cards can help rebuild your credit.
What Is the Difference Between Secured and Unsecured Credit Cards?
After you file for bankruptcy, one of the biggest challenges is getting a credit card. A secured credit card may be a great solution. Secured credit cards require a cash deposit, which is used as a protective measure for the issuer. This cash deposit serves as a line of credit. If you put down a $300 cash deposit, you can spend up to $300 on the card. If you fail to make payments, your issuer can simply take the money from your cash deposit.
Conversely, unsecured credit cards do not require a deposit and therefore pose a greater risk to the issuer. Applying for an unsecured credit card after bankruptcy can be challenging. Even if you are eligible for an unsecured credit card post-bankruptcy, the interest rates and fees can be very high, posing a challenge for making on-time payments.
How Do Secured Credit Cards Work?
Once you make the cash deposit for a secured card, they work just like a regular or unsecured card. You can use your secured credit card anywhere credit cards are accepted, including online stores. Just like an unsecured card, secured credit cards accrue interest for balances that carry over.
You can apply for a secured credit card with most major credit card companies. Some secured cards will have an annual fee. However, you should never pay an annual fee of more than $50, and there are many options available in which no annual fee is required.
Using Secured Credit Cards to Build Credit
Secured credit cards can be a great tool for building credit post-bankruptcy. However, to effectively build credit, your card must be used correctly. Some strategies include:
- Don’t make tons of purchases. Use your card to make a couple of small purchases every month.
- Pay your balance in full and on time to avoid occurring interest. Since secured credit cards are generally issued to high-risk borrowers, they tend to have higher interest rates.
- Monitor your credit score. Over time, paying the balance and making on-time payments on your card will improve your credit score. Once it’s improved, ask your issuer if you can upgrade to an unsecured card.
Contact a Skilled Debt Settlement Lawyer for Help Improving Your Credit
After filing for bankruptcy, it’s important to consider all of your options for rebuilding your finances. The best way to navigate the complexities of improving your credit post-bankruptcy is to work with an experienced attorney.
If you are struggling to improve your credit as a result of bankruptcy, the lawyers at McCarthy Law are here to help. Our team is dedicated to helping our clients navigate their financial circumstances and reach a favorable outcome. To schedule a consultation with one of our skilled debt settlement attorneys, call (855) 976-5777 or fill out our online contact form.
Garrett F. Charity
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