Q: I just came out my bankruptcy last September. What is the best credit card after you have a BK on file?
A: Thanks for your email Mike. With today’s economy, unfortunately bankruptcy has been almost inevitable for quite a few people in America. Whether it’s due to a job loss or catastrophic medical bills, it’s a very real scenario that most of us are susceptible to. So please don’t beat yourself up over it, because the odds are you were not at fault. So instead of dwelling on the past, try and focus on making a better future. I’ve updated this advice for June 2014…
The Best Credit Card After Bankruptcy Currently Available
For over three years in a row this card from one of our sponsors has been rated as the #1 most popular choice following bankruptcy. Since it is a secured account (secured by a deposit) it is easy to gain approval. Give the application a shot, it only takes a minute to complete.
I also recommend that you try out this free tool from Capital One. It allows you find out which card offer(s) you may be eligible for without affecting your credit score, which can save you time and hassle:
So is there such thing as a best credit card after bankruptcy? Well even during a prosperous economy, lenders are often quite hesitant to do business with someone that has had a recent bankruptcy (the old saying, once bitten twice shy applies). In fact, some lenders like American Express are rumored to blacklist applicants altogether if their current credit report still shows a bankruptcy on it (however the bankruptcy is no longer being reported, it may be possible to apply).
Anyway long story short, it’s an uphill battle during good times, and an even greater battle during bad times. But credit cards after bankruptcy are possible if you play your cards right, literally
Secured vs. Unsecured
A secured credit card involves putting up collateral (typically cash you put on deposit with the issuer) and you can then borrow against that amount. For example, you would deposit $500 with the card company and that would allow you to charge up to $500 on the card. Down the road when you are ready to close the account you will get back your full deposit, assuming you don’t have a balance. This process provides a convenient end run around the risk potential posed by those with bankruptcies in their past since it is a risk-free proposition for the lender.
An unsecured credit card is what we typically think of as a normal credit card – something that allows you to make charges without any collateral/deposit. As you can imagine, almost any unsecured credit card application you fill out after a bankruptcy will almost certainly be declined. So that means the best credit card after bankruptcy will most likely be some sort of secured credit card… simply because that’s about the only thing you will be able to get approved for at first, regardless of whether you had a chapter 7, chapter 11, or chapter 13 bankruptcy.
Tips For Secured Credit Card Application
There are a number of dodgy companies out there that attempt to take advantage of people when they’re applying for credit cards after bankruptcy. So here are a couple tips to follow to make sure you don’t get ripped off:
Reasonable Fees & Rates: Because they know you have few options, some issuers will try and price gouge you with outrageously high fees that will cost you hundreds per year. Play close attention to the application fees, annual fees, and interest rates. Ideally, you want them as low as possible. In my opinion, a reasonable amount for your monthly and/or annual fees should be $30 to $60 over the course of your first year.
Credit Bureau Reporting: Did you know that all banks/lenders have to actually pay to report a customer’s credit history to the bureaus? Because of this, some unscrupulous secured credit cards will try and save a few bucks by not even reporting their customers to the three major credit bureaus… essentially making their cards useless! So please be sure when you apply for secured credit card that it actually will be reporting your account. There should be wording to that effect in their terms and conditions (in fine print, of course)
This post was written or last updated June 6, 2014