This post was written by guest blogger Ryan H. from CreditCardForum.com, where he reviews the best credit cards. His posts can be found on the blog portion of that site every Tuesday and Thursday.
After you’ve had a bankruptcy or charge-offs, it can be nearly impossible to get a credit card. Fortunately, secured credit cards are available to anyone, regardless of their credit. In fact, all post bankruptcy credit cards are secured.
How does a secured credit card work?
With a secured credit card, you will put up a security deposit that you can then charge against. For example, if you put down a $500 security deposit, your credit line on the card would be $500. When you close the account (after you have built up your credit a bit) you will get the security deposit refunded.
How much does a secured credit card cost?
The prices vary great, but usually secured credit cards to rebuild credit will set you back around $100 for the first year – this is charge either as an annual fee or a monthly fee. Some also charge processing fees and application fees, but you should avoid companies that do that.
How long until I can move to an unsecured card?
You should use your secured credit card to rebuild credit for at least 9-12 months. After you have done so, it may be worth applying for a basic entry level unsecured card, such as a entry level Capital One, who is known for gearing their cards to those that don’t have good credit. Unfortunately, you probably won’t qualify for good cash back credit cards like the Citi Forward cardfor a couple years or more. Why? Because the Citi Forward card and other high cash back credit cards typically require stellar credit.
Obviously since secured post bankruptcy credit cards cost you money, you don’t want to have one longer than you have to. So once you are able to get an unsecured card or two, you may want to consider cancelling your secured card. That being said, part of your credit score is based on the length of time you have accounts open, so there is some benefit to keeping your secured card open if you don’t mind paying the annual fee.
Conclusion?
Secured credit cards to rebuild credit are a smart way to get back on your feet. They are the best credit cards for those with bad credit that can’t get approved with any other card. Just make sure you pick one with fair terms and that you use it responsibly.
