Can I Still Use Credit Cards After Filing for Bankruptcy in Arizona
Our experienced Tucson bankruptcy attorney, Eric Ollason, provides the skill and guidance our Arizona clients need to successfully pursue the best legal action to help eliminate their debt.
Getting a fresh financial start can also make all the difference in our client’s ability to shed the stress and anxiety that accompanies overwhelmingly debt, so they can start saving money instead of spending it.
When Arizona residents have their bankruptcy discharged, they may begin looking for ways to start rebuilding their credit.
They often find it is still possible to get a credit card, although they may only be eligible for secured cards or cards designed for those with poor or limited credit.
Here is why you should be careful about obtaining another credit card and potentially throwing yourself back into debt after bankruptcy.
Credit Cards Are Designed to Keep You in Debt
This is especially true if you are only eligible for secured or high-interest credit cards.
Secured credit cards can be a great tool to help rebuild your credit.
Secured credit cards require the user to pay a security deposit when the card is issued, which may be the same amount as the line of credit.
For example, a $200 deposit might give the user a $200 credit limit.
Depending on the credit card company, the cardholder may only have to pay a portion of the limit to receive $200-$300 in credit.
Alternatively, unsecured credit card companies extend credit limits without a deposit. If you are trying to rebuild your credit after bankruptcy, you may only be eligible for a high-interest rate card.
These cards do more for the credit card company’s finances than they do the cardholder. The lender relies on the tremendous amount of interest they collect long before you can pay off the principal to boost their revenue.
If a cardholder is only paying the minimum payment and continuing to use the card each month, he or she will need years to pay off even a reasonably small amount of debt.
Credit Cards May Contribute to Your Inability to Save Money
In Arizona, the usury rate is 10%, which means banks and other financial institutions cannot charge a consumer more than 10% interest on loans, credit cards, and other products.
However, the federal guidelines are much looser.
National banks can charge borrowers based on the highest interest rate of the bank’s home state. This means that although you live in Arizona, some banks may be able to charge higher interest rates because they are based in other states.
If you have a credit card with an interest rate of 20%, the monthly interest rate for a $100 charge will be $20. Often, credit card companies impose a low minimum payment requirement — say, $25 for the current example — which means if the least amount is paid each month, users are barely chipping away at the principal of $100.
The more you spend, the more interest you will pay. This seemingly inescapable financial predicament will not only cost more but will limit your ability to save money and avoid the need to use credit cards going forward.
Credit Cards Cannot Be Used If You Are Not Carrying Them
Credit cards obtained after bankruptcy should only be used for emergency situations. When they are, you should make a concerted effort to pay off the balance quickly to avoid accruing interest.
If you find yourself unable to resist using a credit card during non-emergencies, it may be time to store the card with a trusted friend or relative, so you can access it when necessary, or otherwise risk the temptation to use it.
If are currently in credit card debt, and are unsure where to turn, Contact our experienced bankruptcy attorney in Tucson, Eric Ollason, to learn more about your legal rights and options to start fresh by calling (520) 791-2707 to schedule a free consultation today.