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Credit card bankruptcy is a growing trend because of wild spending habits and low savings rates. In fact, until just recently, the average U.S. savings rate was 0%! There was once a time where bankruptcy meant the end of available credit. However, now you can get credit cards after bankruptcy. However, doesn’t this just make people even more reckless with their spending since they have no real consequences?

Well, actually, credit issues are now in a better position and it has become profitable for them to issue credit for those who have filed for bankruptcy. In 2005, a law was passed that makes it harder for consumers to file for bankruptcy after they have already filed. This makes lending to at risk borrowers more favorable in the eyes of creditors. Credit card companies are also allowed to charge extremely high interest rates to risky consumers in an effort to thwart their risk. Another simple reason that risky borrows still get credit card offers is that credit card companies send out so many offers each year that some are accidentally sent out to people who are not credit worthy. Credit issuers also use risk-based pricing tables that are very complex in order to give credit to those who are just emerging from the depths of bankruptcy.

Lending that continues even after bankruptcy, or bankruptcy credit cards, is a widespread occurrence. A study done by Katherine Porter of the University of Iowa found that “96 percent of consumers polled were offered new credit in their first year after declaring bankruptcy”. Porter claimed that the new bankruptcy laws would actually make the matter worse because consumers would have to wait two extra years before they could start over and file for bankruptcy.

One of the main reasons at risk individuals are able to get a credit card after bankruptcy is because of the fact that there is no limit on interest that a credit card company can charge. Since consumers are desperate for credit, they put up with the out of control interest rates in order to make it through life. If credit card companies were subject to an interest rate cap, then a lot of people that currently have credit cards would not be eligible for them. So unreasonable rates are a necessary evil because they make credit available to the vast majority of Americans.

If you declared bankruptcy and then suddenly get a great offer, don’t jump for joy just yet. The credit card company accidentally sent you the offer because more than likely their lists had not been updated to reflect your risky status. Creditors normally refresh their lists one time every quarter and this means that you could still continue to get credit card offers for a few months after you filed for bankruptcy. Besides the credit card marketing department intentionally sends out offers to everyone and their mother. It is then the job of the bookkeepers to screen the flood of applicants to see if they qualify.

A credit card offer that you get in the mail is not a guarantee. If you agree to the terms and send it back to the creditor then they will run your application through their computer to determine if you have had any recent late payments or if you have filed for bankruptcy. They get this information by pulling an up to date credit report on you. However, just because the credit issuer sees that you have filed for bankruptcy does not automatically mean you will be denied, you will just pay a much higher interest rate. Borrowers that are more risky (based upon facts in the credit report and information gathered by looking at the pricing models) will be subjected to more than higher interest. These consumers will also be charged fees for paying late or going over a pre-defined credit limit.

Oddly enough, you may get a credit card offer from a creditor that is already hounding you to pay your existing debt. This just goes to show how easy it is to get credit cards after bankruptcy. This is also a classic example of the inefficiency within a lending organization. The collections department and the marketing department are at odds with each other. It is not unheard of to open your mailbox and find a past due notice and a credit card offer, both from the same company.

If you do get an offer to get a credit card after bankruptcy then there are some things you should be aware of. First of all, getting these offers can actually be beneficial to you. It offers you a chance to re-establish your credit and have a fresh start. Despite the benefit, you still need to be cautious. You will need to look at any offer you get with a highly critical eye. Just because a company offers you credit does not mean that you should take them up on their offer.

Sandy Shore, a debt counselling agent with financial management firm Novadebt, says, “You’re either not going to get into debt again, or you are going to get into debt again — but before you do they [card issuers] are going to make money off you in fees”. L.A. consumer credit attorney, Edward Jamison, hold the view that credit card companies are like a parasite that feeds off a weak host. He says that creditors are taking advantage of people that are coming out of bankruptcy because they are not financially health and are therefore venerable.

If one this is certain, it is that nothing is certain. With the way the economy has been spiraling downward, it is not clear if the free flow of credit cards will last much longer. You can bet that the day that issuing credit to high-risk borrowers becomes unprofitable, the practice will abruptly stop.