After claiming bankruptcy, you want to tackle repairing your credit sooner rather than later. While exploring your credit-building options, you learn about secured credit cards. Could they offer the help your financial health needs?
NerdWallet offers an in-depth secured credit card guide. Determine whether this could put you on the path to financial freedom after bankruptcy.
Secured credit card basics
You must offer a deposit to open a secured credit card account. Your deposit amount also becomes your credit limit. Be careful to keep up with payments, as the credit card issuer may claim your deposit if you default. You get your deposit back if you establish a history of on-time payments. Depending on your secured card choice, you could upgrade to a standard unsecured credit card.
After making a deposit, use your secured card like you would a regular card. Make the most of the investment in your financial health by using credit responsibly. That means not carrying a balance from month to month, so you avoid interest payments.
While exploring secured card options, note whether you must pay an annual fee. Usually, companies charge no more than $50 for fees.
Secured credit cards compared to prepaid debit cards
Prepaid debit cards and secured cards seem similar on the surface. The biggest difference is with a debit card, you use your own money for purchases. You borrow money from the issuer with a secured card.
Debit cards do not help your credit the way secured cards do. Instead, credit bureaus receive a report of your secured card activity.
The right secured card may help you bounce back from bankruptcy. Use them wisely to maximize the advantages.