Taking Time To Compare Bankruptcy Credit Cards Pays Off With Lower Interest
Filing for bankruptcy is not something many people expect to do.
The situation is bad all around, with the individual watching the credit score plummet and creditors never recouping the money they are owed.
Creditors can write off losses but bankruptcy filers cannot erase their credit score and make it better. Ironically, one of the best ways to re-establish credit after filing for bankruptcy is to use credit.
Taking some time to review and compare bankruptcy credit cards and prepaid cards is recommended.
By using a credit card, bankruptcy filers show they can be trusted with money they borrow. Unfortunately, by the time an individual has filed for bankruptcy, most creditors have fled.
They were burned once by failure to repay and will not be offering credit to the same person anytime soon. A consumer with a bankruptcy on the credit report needs to look hard to find a creditor willing to do business.
The Internet, of course, is the easiest way to find credit cards designed for people with bankruptcies. Once some options are found, rules established by the card issuer reveal how long after a bankruptcy filing a person can be approved for a credit card.
The initial options will most likely feature a limited line of credit and high interest rate. It will be a long time before most consumers see the rates and limits they had before the bankruptcy.
Even cards that have what seem to be reasonable rates may have a catch. Card issuers may choose to raise the rate at any time and reading the fine print will reveal whether this is the case.
It might be difficult to find a card with no annual fee, so consumers should look for one with the lowest fee and the lowest interest rate. Using the card responsibly and making monthly payments on or ahead of time will begin reestablishing credit.
Some consumers in bankruptcy will find it impossible to qualify for anything other than a secured credit card. The applicant will need to establish a bank account that secures the limit of credit featured on the account.
If the credit card account goes into default, the card issuer is protected because it can recoup the money from the bank account.
Barclays Bank, The Co-Operative Bank, and Nationwide Building Society are the only three banks that provide bank accounts to individuals with undischarged bankruptcies.
People in bankruptcy will not qualify for a regular credit card until their bankruptcies are discharged. In the meantime, they can get a prepaid card, which is like a virtual bank account and does not require a credit check.
Card One, Bread, CashPlus, Freedom, Clear Cash, and Kalixa are a few prepaid card issuers. Card One features a free application and transaction fee, but has monthly fees of £12.50 to offset these.
The application fee for a Bread prepaid card is £7.50 but there is no monthly fee, although the transaction fee is two percent.
Once consumers have used a prepaid card to help repair their credit and the bankruptcy has been discharged, they can explore credit cards. Capital One, Vanquis, aqua, and
Barclays are the main UK credit card issuers specializing in credit cards for individuals with poor credit. Consumers should compare bankruptcy credit cards to find the one with the highest credit limit, lowest interest rate, and lowest monthly fee.