Whether you are a young person starting out with no credit or are re-establishing credit after bankruptcy, one credit-building option is a secured credit card. A secured credit card requires a deposit to guarantee the card. For example, the bank may require an initial $500 deposit and give you a credit line of $500. As you prove capable of paying off your balance in a timely fashion, the bank may decide to extend your credit line to $700 without requiring a further deposit. Responsible monthly payments gradually restore your credit. The trick in restoring credit is to make payments for several months before paying the debt off. Remember the goal in this case is to build credit which can be frustrating because you must waste money making payments towards interest to build you credit.
Research secured credit card options
As with most things, all secured credit cards are not equal. Some have higher APRs (Annual Percentage Rates), which mean you pay more interest. Others with lower APRs have other fees that are costly such as annual membership fees. My BankTracker shows a rate comparison of some of the most common secured credit cards available—
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CitiBusiness
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Chase's Ink Cash
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Discover Open Road Card for Students
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American Express
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Costco and American Express
However, there are many other secured credit cards available, and you should do some research, read the fine print, and do some calculations so you understand the interest and fees you will pay. You don’t want a card that has such high interest and fees that there is little left of your secured deposit.
Your bankruptcy lawyer can also advise about secured credit cards and perhaps suggest whether they are a good option for you. Harold Shepley & Associates has years of experience helping people with financial issues as a Pennsylvania debt relief firm. The firm also offers a free consultation to analyze your financial situation.
