Alternatives to CC's

[nioka]

I think with BK that CC would be a dirty word, but I see on one post that almost as many people are using them after BK as before.

I realize that most bank accounts have a debit card but there are times when you must have a CC to make a purchase.

I was wondering what the alternatives are.

I see Wmart has a prepaid visa with fees.

I was also wondering about PayPal for online purchases.

I am in the process of filing and trying to avoid mistakes.

Your comments are appreciated, thanks.

[Pjmax]

Nioka, I used only a debit card for 3 1/2 yrs. before filing a BK. I lost my job in 2009, and immediately stopped using my CC's. I had never charged anything that I couldn't reasonably pay in full within 3 or 4 months. (Now my PIF timeline is immediately.) My CC debt wasn't that great, but due to age (I'm now 64) and the changing job market, the likelihood of ever having near the same income again was not good. I have a debit card through my bank, and the Paypal debit card (tied to my checking) which I prefer to use for online purchases. You can adjust your habits to live on cash.

Some folks who filed BK will never have a CC again, and there are others with whom credit discipline wasn't the biggest factor in filing BK. You have to know yourself, learn new ways of saving and spending. If you do decide on another card after you are discharged, don't use it for anything you don't already have the cash for. There are some whose jobs require travel and a credit card, and there are some of us that have future plans of a mortgage or car purchase, and rebuilding credit will help that process later. Personally, I will need an auto loan in a year or two. I am saving what I can, so hopefully my car purchase will be mostly, if not all, cash. But, if my car dies before then, I will be in good shape for another car, and because I'm saving, any car payment will be low enough to be affordable.

I have 3 bank credit cards that I use occasionally for things I would normally pay cash for, and I pay them in full, this just to show use on the cards, while my credit has been improving. I still use my debit card for most purchases, and I think of my CC's as emergency backup, not everyday or large purchase use.

If you do plan on another CC after BK, consider it to be emergency use only, and tuck it away in the sock drawer.

[nioka]

PJMax

Once again, thank you.

I am 70 and grew up in a cash only environment. Several years after I was married my wife worked for a bank and they gave her a CC. I stayed on a cash basis but she racked it up. My problems started after the company I retired from got a court order to end our insurance even though their profits were in the billions. This was the first rug pulled out from under me. I had to get gap insurance and life insurance. I thought I was covered for life.
Then I had a heart attack. Hospital only cost me about $1K. The doctors $5k. Then I had to move to a single floor because they didn't want to climbing steps. The management could not provide such a residence and I needed to move and they would not release me from the lease costing me my last $4k. I had paid cash for my car when I retired but the repair costs have increased more than anything I imagined. That's pretty much how I got into trouble. High medical copays, being honest with a land management, and trying to cover out of the ordinary expenses. I would keep telling myself I can get out of this and I would have several good months where I was able to pay a good amount back. However, by doing that I could not save and as soon as something major came up I was not only back in the hole but deeper in the hole.

I keep telling myself what is to prevent this from happening all over again and I realize I am here because I am honest. I have a friend who has about $250K in banking and investment. He was treated from prostrate cancer and his radiology bill was $16k. Rather than pay it he told them he had no money and they let him pay $100 a month. This went on for a few years and the ended up writing it off.
I went to the hospital to pay my deductible for an out patient procedure, $300. The clerk asked me how much I was going to pay and I said all of it.
I always believed that if a person lived right, was honest, worked hard, and paid their bills they would be rewarded. I could not have been more wrong.

I have tried going cash only but found that today that is almost impossible. I thought I could use PP for online purchases but learned that many websites to not take PP nor debit cards. That's why I asked about the prepaid CC. I don't like the fees but if a person needs to use a CC a PPCC seems like an answer. I was wondering if anyone had anything against prepaid CC's.


Another question; is it acceptable to move to another state before filing for BK

[Pjmax]

Some people do use prepaid cards. But, I have never seen a website that didn't accept a debit card, and I buy online a lot. Not all accept Paypal, but a Paypal debit card or a bank debit card goes through just like a credit card, the only difference being the funds are debited from your account right away instead of being billed to an account.

The only time I've ever had difficulty with a debit card, was my former auto insurance co. (Geico.) I had it on auto pay with my Paypal debit card, and Geico would erroneously code the transaction as an ATM instead of credit, so the payment would be denied the first time, they would re-code and it would go through the second time. I found this out from Paypal customer service, they told me Geico does this all the time. I ended up just connecting the auto-pay to my checking, to avoid the hassle.

You can do a search here for prepaid cards, and read about others' experiences and recommendations.

[Pjmax]

I don't know why it wouldn't be acceptable to move first, before filing. Just be aware there are residency requirements for filing in a new state. You can file at any time, but if you have lived in the new state for a period less than the requirement, you may be required to file in your former state. It sounds like you do not have to rush your filing, so you will probably be fine waiting in the new state, if that's what you choose to do.

Also, do some research on which state's exemptions will benefit you more. If you post the state you are planning to move to, the experts (not me) may be able to advise you on this.

[skyblue69]

I think with BK that CC would be a dirty word, but I see on one post that almost as many people are using them after BK as before.

I realize that most bank accounts have a debit card but there are times when you must have a CC to make a purchase.

I was wondering what the alternatives are.

I see Wmart has a prepaid visa with fees.

I was also wondering about PayPal for online purchases.

I am in the process of filing and trying to avoid mistakes.

Your comments are appreciated, thanks.

The direct credit part of PayPal is their "Bill Me Later" service that extends credit to the PayPal account holder. When I filed chapter 7, Bill Me Later was included in the bankruptcy, was immediately closed by them, eventually written off & discharged within the bankruptcy.

PayPal account itself stayed open & I continue to use it to this day to receive payment from a few things I occasionally sell on eBay & then use those funds in the account to make online purchases & sometimes directly at stores. PayPal card is a debit card & not reported to the credit bureaus so it won't help to rebuild your credit score.

[nioka]

PJMax

I didn't realize the residency rule.

I want to move to Washington State. I just read they have a two year residency requirement for filing for BK.

My income is limited to SS and a small pension. I own a 2005 Ford Escape probably worth $6k at this point. I am not sure if that is exempt in WA State. I know it is exempt in TN.

I am not sure if I should just make the move and file in WA or finish the task here in TN. I really don't like the idea of having creditors hounding me for two years. Or would it be easier to move to WA and come back to file in TN.

Skyblue,

Thanks for the info. It is good to know I would still be able to use PP.

[Pjmax]

My knowledge on the moving to another state subject, is limited. I'm sure you'll get lots more help soon. Weekends get kinda slow on the forum, so please allow some time for responses.

By the way, you are doing the right thing by asking all these questions before you file and make any big moves. So many come here after filing, which is fine, but often too late to alter the course.

Don't be afraid of the creditors, there are manageable ways to deal with them, and you must look after yourself and your priorities, such as managing life after BK.

Also, your car is usually valued at a trade-in price. My 2002 Escape (V6, 4WD, LTD) average resale value was well over $6000 at the time I filed. I believe the value my attorney used was under $3000 - lowest trade-in value. Of course, not all attorneys do it the same way.

[GoingDown]

During the 7 long years after I defaulted on all my debts, I started using cash and money orders whenever possible, and for everything else, I tried to use the store gift cards because had no fees associated with them. For example, if I was going to buy something at Amazon, I went to a local grocery store and bought an Amazon gift card. Then I could buy something on Amazon, and any remaining balance would be applied to my next purchase. Otherwise I would have to buy a Visa gift card, pay a fee at the time of purchasing of the card, and once the balance got down to a certain level, the card became worthless because purchases would be declined. They're wasteful.

And now you can buy something online at Walmart, and then select pay with cash, and as long as you go down to a Walmart store within a few days and pay for it with cash, they will ship it to you, or to the store, and then you can go pick it up at the store and avoid the shipping cost.

[skyblue69]

The direct credit part of PayPal is their "Bill Me Later" service that extends credit to the PayPal account holder. When I filed chapter 7, Bill Me Later was included in the bankruptcy, was immediately closed by them, eventually written off & discharged within the bankruptcy.

PayPal account itself stayed open & I continue to use it to this day to receive payment from a few things I occasionally sell on eBay & then use those funds in the account to make online purchases & sometimes directly at stores. PayPal card is a debit card & not reported to the credit bureaus so it won't help to rebuild your credit score.

Nioka, Let me add a few things. My PayPal card is a Business Direct Debit card. I believe PayPal may have other cards that use credit from other funding sources & may or may not keep the PayPal account open once you declare bankruptcy. Might be a good idea to check your PayPal account to see where the actual credit it is funded from.

[nioka]

The other day I opened a bank account with a bank with offices all over the US. (Don't exactly know where I am headed when this is all done). I was surprised to see that they offered a pre-paid CC. When I asked why they would offer this I was told it was because the economy had created a demand for this type of product. (I suppose there is a lot more people in trouble than the news media would have us believe). The charge was $4 to initiate and $4 monthly maintenance. I don't know how that compares to other pre-paid cards.
Anyone know what Wmart charges?

[nioka]

OP Update

It has been about two months since I stopped using my CC's. I am using Paypal and my debit/visa card just as I used my CC's and can buy everything I used to buy.

Other than trying to rebuild one's credit rating why even bother with prepaid cards that charge fees?

[GoingDown]

Now that over 7 years have passed and my credit report is once again spotless, I have a new Visa credit card (with no annual fee!) that I am using very sparingly. I pay it off at the end of each month.

It is nice to have a credit card again to buy things I need online without having to run down to Walmart to pay cash for everything.

So, I sat down and calculated it, and I defaulted on over $68,000 of debt and never paid back any of it and never had to file bankruptcy. But it took 6 years to get past the SOL for lawsuits, and 7 years for all the negatives to fall off, and those were some tough years.