Getting a Great Student Credit Card After Bankruptcy
By: Larry Goldberg
While you may have thought filing for bankruptcy was the end of those great student credit card offers, you couldn’t have been more wrong. Even if you’re one of the thousands of students who has had to file for bankruptcy while still on campus, good credit cards aren’t out of your reach after you file.
The first step in the process is to take a look at your options. In the world of credit cards, even student credit cards, there are basically two major options. There are secured credit cards, then there are unsecured credit cards. Secured credit cards work when you open a savings account with a credit card company. You’ll be asked to deposit a certain amount of cash into that savings account, and you’ll have a credit limit that is the amount you deposited in the account or a percentage of that amount. Should you ever be unable to pay your bill, your new credit card company can simply deduct the amount from the savings account. After your bankruptcy, secured student credit cards are fairly easy to get. Many of them require an application fee, and most come with higher interest rates than you might have expected, but they’re the perfect way to reestablish your credit. Ensure that the secured credit card company does report to the major credit bureaus. Make some purchases, pay your bills on time, and you’ll be on your way to a new credit history.
An unsecured credit card is the kind that most people have. You’ll be given a credit limit and an interest rate on your purchases, cash advances, and balance transfers. Remember, though, that after you file for bankruptcy, your interest rates will be much higher than they were before the bankruptcy. Your credit limits may be significantly lower as well. Keep in mind that there might be annual fees involved as a result of your bankruptcy, and should you encounter financial trouble, your new unsecured credit card company may be less likely to work with you on a payment plan.
Bankruptcy as a student, though, doesn’t limit your ability to shop around for a great credit card offer. Talk with the companies you’re considering to get the best rate and terms to fit your needs. Low interest rates may be essential if you carry debt from month to month, but if you pay off your balance in full each month, you may want to see if any of the credit cards you’re thinking about offer a rewards program. Make a list of the things that are important to you in a credit card, and see which companies can meet your needs. Remember, though, stay away from trying to open too many credit card accounts. That can only lead to a lower credit score and more financial trouble. It’s a great idea to start out with one credit card to rebuild your credit, and many bankruptcy filers have found that even after bankruptcy, a good credit score can be reestablished in just a few years.
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