More than 1.4 million Americans claimed bankruptcy during the
preceding year as of September 2011 (the latest statistics
available), punctuating the frustration many Americans felt at the
height of the economic crisis. Filing for bankruptcy protection
under either
Chapter 7
or
Chapter 13
requires overcoming extreme emotions. We fear the social stigma of
being classified "bankrupt," and we fear getting rejected for
credit cards, checking accounts and other basic financial
services.
Lenders understand that a bankruptcy rarely reflects your true
relationship with money. A Texas A&M University research team
found that more than 4 out of 5 bankruptcies resulted from "adverse
events" outside the control of filers. According to studies
published in The American Journal of Medicine, more than half our
country's bankruptcies involved significant medical debt of over
$5,000.
Getting back into debt shouldn't be your goal when applying for
credit cards
after bankruptcy. Texas A&M's study of "strategic filers" found
that lenders can detect underlying cracks in the foundation of your
personal finance, especially in the months after a bankruptcy
discharge. Because you're barred from seeking bankruptcy protection
too soon after a discharge, you're suddenly a much less risky
proposition to lenders. Consider these accounts and tools as
opportunities to rebuild your financial life:
Three credit cards to consider after bankruptcy
After 2008's credit crunch, many subprime lenders fled the
market, leaving behind a handful of "fee harvester" companies and
an even smaller group of banks willing to work with post-bankruptcy
consumers. Based on ratings in CardRatings.com's credit card
database and on customer reports from online forums, five products
stand out as ideal building blocks for your new financial
future:
Though frequent visitors in credit card forums may complain
about this lender's relatively high annual fees and interest rates,
Orchard Bank's approach to credit cards for bad credit makes their
Visa and MasterCard accounts attractive after a bankruptcy
discharge when you may be shunned outright by other banks. In most
cases, you'll pay under $60 in annual fees for an unsecured credit
card, with no application fees or additional service charges.
Wells Fargo Secured Visa
Wells Fargo emerged from the financial crisis as a dominant
retail bank across the United States, taking over branches from
failed lenders. With just a $300 minimum security deposit and a $25
annual fee, you can track your expenses and protect your checking
account from unexpected overdrafts. The bank reviews its secured
accounts periodically, meaning you could convert to an unsecured
credit card and get your deposit back if you manage your account
wisely.
BankAmericard Secured Credit Card
Like Wells Fargo, Bank of America has taken a retail-focused
approach to personal service. When the bank relaunched its iconic
BankAmericard brand, it reinstated a secured credit card option for
customers with checking and savings accounts. Their annual fee is
slightly higher than Wells Fargo's, with a similar APR and feature
set.
Two post-bankruptcy debit card solutions
Preparing for bankruptcy can strain your relationship with
financial institutions. If you kept your credit card and your
checking account under the same roof, it's likely that your bank
cut off access to check writing privileges and linked debit cards.
It's even possible that a former bank listed you with credit
bureaus and with ChexSystems as too much of a risk to hold a
checking account.
UPside Visa Prepaid Card
Upside bears the flag for a new breed of reloadable prepaid card
that aims to replace traditional checking accounts. Set up direct
deposit from your employer, and you could reduce your monthly
service fee to just 99 cents. Unlike most prepaid cards, UPside
Visa includes a bill payment service that lets you send personal
checks to anyone from your landlord to your electric company.
Green Dot Prepaid Debit Card
Green Dot has become a familiar brand to anyone who shops at
drug stores or convenience stores. Replacing a traditional checking
account with this reloadable debit card makes sense for many
consumers who find bankers' hours inconvenient. In many
communities, it's easier and less time consuming to pay around $5
for a Green Dot cash reload than to wait in line for a teller.
Even though most prepaid debit cards carry Visa or MasterCard
logos, they don't offer the same purchase protection as credit
cards. They also don't report purchasing patterns or income to
credit bureaus, so they won't affect your credit score. However,
learning to budget your purchases using a reloadable card can help
you build new habits you can use in the future, helping you qualify
for a rewards credit card with a bigger credit limit.
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