Obtaining Credit Card After Bankruptcy Comes With Higher Cost
Despite the stigma and possible embarrassment of filing for bankruptcy, many people have mitigating circumstances that make it their only option to avoid repeated court proceedings against them. Additionally, there are some financial companies that have no trouble offering to issue a person a credit card after bankruptcy, usually with a higher interest rate and annual fees attached.
One the reasons companies will offer a credit card after bankruptcy is the fact that a person cannot file for bankruptcy for at least seven years after the initial action has been discharged. Knowing this, these credit card companies have a legal recourse in collecting on any unpaid debt resulting from the card's use. While most debt charged on a credit card is considered unsecured, if the cardholder cannot file bankruptcy, the company can use wage attachment to gain repayment.
There are numerous dangers is obtaining a credit card after bankruptcy, beyond the usually higher interest rate, as charges for being late with a payment as well as annual fees can quickly put the person into a bad credit risk again. Many companies offering a credit card after bankruptcy offer it as help in rebuilding a credit rating and even with annual fees as well as processing fees, sometimes equaling the initial credit limit, people take them out hoping to get back on their financial feet.
Troubles Can Keep Adding Up
Unfortunately, if the person has a credit card after bankruptcy, and the initial fees, for example, are $290, and their initial credit limit is $300, being even a day late with the payment will result in a late fee of, on average, $30. This pushes their liability to $320, causing another $30 to be added as an over the limit fee. The person holding this credit card after bankruptcy now has a debt of $350 and they have not used the card at all.
In addition to the new debt, the interest rate on the card can quickly go to the maximum allowed by law because they failed to meet their obligation on the credit card after bankruptcy. They also have no way out except to pay the balance on the card and some companies will make the demand that the balance be paid in full within 30 days or face collection action. This can include anything from daily phone calls to court proceedings and wage garnishment. Once this happens, getting out of debt from that one credit card after bankruptcy can take years to clear up.