Almost all credit cards issued by banks or credit unions are unsecured. This means that if a person files for bankruptcy, these types of consumer debt are eligible for discharge. (Except in some cases where a person runs up a credit card right before filing bankruptcy—don’t do that.)
However, some people who have store credit cards (think Best Buy, Sears, Lowe’s) may not realize that these cards might be secured cards. Not all are, but some cards (read the fine print) may have a security interest in any property purchased with the card. For example, if you buy a washing machine from Sears with a secured credit card, that washing machine is collateral on the debt. In the event you don’t pay the card, Sears can actually repossess the washing machine, or anything else you bought on the card!
This does not mean people should not use store credit cards. They have benefits too–the main one is usually, they will issue store credit cards to people with lower credit scores than other bank-issued, non-secured cards. This makes them temping for people who may have trouble obtaining a bank-issued, non-secured credit card. It can make buying necessities possible, which can be lifesavers if someone is temporarily in need of a little credit. The downside is these usually have higher interest rates than non-secured cards–so make sure to read the fine print, which is the interest rate (APR) and see if there are any annual charges. Annual charges are charged whether you use the card or not!
Like anything else that has to do with credit, financing and budget, the more you plan ahead, the better you will be. If you have purchased goods or merchandise with a store credit card and the store is threatening repossession or other harassing collection tactics, you have rights. In many circumstances, a person may have options to either keep the property, surrender the property or have the debt potentially discharged completely.
Questions about your options regarding a credit card or other financial problems? Attorney Kevin D. Judd offers free consultations to residents throughout the Washington DC area. Reach out to him by telephone or fill out an online contact form.