Today, Dr. Don discusses closing a credit card account and getting credit after bankruptcy.

Closing a credit card account

Dr. Don,
Does closing a credit card prevent the bank from increasing the interest rate if the bank was notified before the new rate went into effect? There still is a balance on the card.
Seeing Red Sonia

Dear Sonia,
If you’re still carrying a balance on the credit card then you haven’t closed the account. If the company’s credit terms allow raising the rate with customer notification, or if action on your part triggered a rate increase, there’s not much to be done about the increased rate. Call customer service to get an explanation, but it’s unlikely that the company raised your rate in violation of the credit terms you agreed to when you took out the card. Your best out is to transfer the balance and close the account. If that isn’t possible, make a concerted effort to pay down the balance as quickly as you can.

If you are able to transfer balances, this site has a page that presents the cards with the lowest introductory rates, and another that looks at the lowest rates after the introductory period has expired.

Credit in bankruptcy

Dr. Don,
I filed for bankruptcy in 1998. Now I would like to have just one credit card to help with my car repairs and maintenance. I don’t want to have any more inquiries than I need to on my already bad credit report. Can you name a few companies that would be willing to give me a chance for sure? I would like to get the best rate, annual fee, etc. that I can. I would also like to know if a secured card is the only way for me to obtain credit.
Tami Transmission

Dear Tami,
Even coming off of a bankruptcy you can get credit, and it doesn’t have to be a secured card. The downside is that it’s going to be expensive. Libby Wells wrote an article for Bankrate.com showing that while high-risk borrowers face sky-high rates, these credit cards can be used to improve your credit rating. Aspire Visa specializes in granting credit to higher risk customers. The Aspire credit card carries an interest rate from 17.25 percent to 27.25 percent depending on your credit history. The card is not available to residents of Iowa, Maine and Wisconsin.

As you point out, a secured card is your other option. With a secured card the customer puts down a deposit to back up the credit line. This site has a comprehensive listing of companies issuing secured cards so you can find the card that best meets your needs. For “10 questions to ask before getting a secured credit card” see Pat Curry’s article.

I like the secured card approach because it reduces the probability that you’ll get in over your head. The problem is raising the deposit. If you don’t think you’ll be able to raise the deposit, then go with the unsecured line of credit but limit its use to financial emergencies.

Related information:
Dr. Don’s biographySubmit a question to Dr. Don
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