Credit Card Offers After Bankruptcy

Credit card offers (after bankruptcy) may be hard to come by for people who have savored the unpleasant experience of filing bankruptcy due to insurmountable debts. This is because credit scores and credit history get negatively impacted as a result of filing bankruptcy. Moreover, enactment of a couple of laws have created a certain amount of confusion regarding after bankruptcy credit cards.

Credit Card Offers After Bankruptcy

A change in the bankruptcy law in the year 2005, made it mandatory for consumers to wait for a certain length of time before filing bankruptcy under the same chapter or a different chapter. This law encouraged credit card companies to offer cards to consumers after a bankruptcy discharge. In May 2009, a new credit card law (Credit Cardholders' Bill of Rights) was enacted. Although the law aims at protecting consumers from unjustified interest rate hikes, it has imposed a number of restrictions on credit card companies. Since, the effects of the new credit card law have been discussed in detail in the aforementioned articles, it will suffice to say that the new law may result in credit card issuers cherry picking new users on the basis of their credit history. People, with adverse credit history will be required to pay higher set-up fees and annual fees and can expect a high introductory APR (annual percentage rate). Although, credit card offers after bankruptcy may decline, one needs to procure a credit card to reestablish credit after bankruptcy.

How to Get a Credit Card after Bankruptcy?

Having a credit card is necessary to rebuild (your) credit after bankruptcy since paying off the entire amount on the card (not just the minimum balance), on a monthly basis, can help erstwhile bankruptcy petitioners improve their credit scores. It's important to note that ex-petitioners' credit scores would have plummeted by 350-400 points as a consequence of filing the same. The following options are available to people who are interested in getting a credit card after bankruptcy:

Secured Credit Card: Applying for a secured credit card after bankruptcy may be advisable since one can get approved in as little as 6 months after bankruptcy discharge. The line of credit is secured with a cash deposit thus eliminating credit risk to the issuer. These cards have higher annual fees and charge more interest as compared to unsecured credit cards but the latter may not be offered to people within 6 months of discharge. It would be prudent to pay-off the entire amount of the credit card from the perspective of improving credit scores. Most secured cards get converted to unsecured credit cards in 12-18 months' time. The card holder should ensure that payment history gets reported to credit bureaus on a regular basis.

Payroll Deduction Credit Card: A consumer can be approved for a payroll deduction credit card, regardless of his/her credit score or credit history, since purchases made with the card are automatically deducted from the card holder's salary over a period of 2 months. Low credit risk for the issuer translates into low transaction costs for the card holder. Payroll deduction credit cards can help enforce discipline on the spending habits of the consumer since the card holder's salary determines the credit limit. A perfect payment history gets reported to the credit bureaus giving the consumer's credit report, the much-needed boost. An additional feature of the payroll deduction card is that, micro loans can be availed by the consumer without any underwriting expense.

Corporate Credit Card: Employers may sign-up employees for corporate credit cards. Although, credit inquiries are conducted by the credit card company before approving the employee for a card, the payment is essentially the employer's responsibility. Thus, an employee with bad credit may get approved for a corporate credit card. As mentioned earlier, payments have to be made by the employer. Hence, these may not show up on the employees credit report. Even if they do figure in the employee's credit report, it's possible that the employer may delay payments by a few months as a customary business practice. This will definitely not help the consumer's credit score.

Credit card offers after bankruptcy may not cease. However, the terms and conditions may become unfavorable to the applicant. It's in the applicant's best interests to opt for payroll deduction cards or secured credit cards, that do require application fees, to ensure reasonable transaction costs and credit lines.