As part of filing bankruptcy, you must repair your financial health. Have you heard about secured credit cards and how they may help rebuild your credit?
NerdWallet explains how secured credit cards work. Learn about all your options for forming a new relationship with money.
The basics
Before receiving a secured credit card, you must make a deposit to reduce the credit card issuer’s risk. If you fall behind on paying your bill, the card issuer may take your deposit.
With a secured credit card, your deposit determines your credit limit. For example, if you deposit $1,000, you have a $1,000 credit limit. Over time and with enough responsible use, you build your credit profile. Depending on the credit card company, you could upgrade to an unsecured credit card.
The similarities between an unsecured credit card
Secured credit cards share many of the same features as traditional unsecured cards. For instance, you may use a secured card wherever you would use an unsecured card, and you pay interest on purchases made with a secured card.
The differences between prepaid debit cards
You may also consider using prepaid debit cards to repair your credit. One major difference between the two options is you use your own money with a prepaid credit card, but use a card issuer’s money with a secured card.
It could make more sense to use a secured credit card rather than a prepaid debit card if you want to repair your credit. With debit cards, issuers do not extend you credit, so they do not help you build your credit.
A secured credit card could be a step in the right direction. Understand how to make the most of bankruptcy.
