Can I get a credit card if I’m bankrupt or still repaying debt?

Information verified correct on October 21st, 2016

Are you bankrupt or struggling with debt? Weigh up whether a new credit card is the right move for you

As of May 2016, the Australian Securities and Investment Commission (ASIC) reports that there is just under $32 billion in Australian credit card debt. This figure, shown on the MoneySmart credit card debt clock, translates into an average of $4,322.60 per cardholder and an average interest payment of $727.06 p.a. at interest rates between 15% and 20%. As for bankruptcies, the Australian Financial Security Authority reported a modest 1.5% rise in personal insolvencies in the last quarter of 2015, which means that bankruptcy isn’t exactly going down.

If you are struggling with debt or bankruptcy today, take comfort in knowing that you’re not alone. Here, we discuss your credit options during this time of personal financial crisis.

Australia’s credit card debt continues to spiral according to new statistics

Should I get a credit card if I’m bankrupt or repaying a debt?

If you find yourself in a persistent position of debt, it may be worth reconsidering your credit limit. Increasing your access to instant credit with a new credit card may do more harm than help in the long run. You may have a good reason for needing to borrow money, but there are other options to consider:

Why you should

  • Helps cash flow. Payments can be deferred until the end of the month, and you can pay things off in instalments.
  • Rewards and cashback. You can collect frequent flyer or other reward points, and enjoy possible cashback incentives.
  • In case of emergency. A credit card provides assurance that you have access to funds during an emergency.
  • Rebuilds credit. Having a credit card gives you the opportunity to rebuild your credit rating if you make repayments responsibly.
  • Balance transfer at a lower interest rate. Perhaps your new credit card has a promotional low interest rate that will buy you some time to repay existing debts.

Why you shouldn’t

  • Propensity to overspend. Spending more than you have will lead to even greater debt.
  • Interest and late fees. You will incur high interest fees if you are unable to pay off your balances on time.
  • False security. Regular use of a credit card can lull you into a false sense of having enough. If you don’t have the cash to back up your credit card expenditure, you could very quickly find yourself in a worse state of debt.
  • Rejection can further hurt your credit. Your credit card applications will result in an even lower credit score if they are rejected, because the hard enquiries made by these lenders will stay on your credit report for five years.

Learn more about credit ratings

Alternatives if I’m bankrupt or repaying a debt

Payment defaults and bankruptcy are among the items on your credit report that could seriously hurt a credit card application. Instead of going down that route, perhaps a wiser move would be to consider your other credit options. Here are some alternatives you may find helpful:

  • Personal loans. Some providers may be willing to lend you money despite your bad credit history.
  • Cash advance loans. Also known as payday loans or bad credit loans, these are short-term loans of up to $2,000 with fixed fees.
  • Bank overdrafts. You may be able to get a personal overdraft from the bank because of your long banking history with them.
  • Debit card. Using a debit card instead of a credit card will ensure that you only spend money you have, which can help you work your way out of debt.
  • Low income credit card.  If you meet the low income requirement, you could consider applying for a low income credit card with lower fees and interest rates. A credit check would still apply in most cases though.
  • Joint account credit card. Another way to get a credit card would be to apply for a joint account credit card with someone that has good credit history. They would be the primary applicant, but you could share their account.

Mistakes to avoid

  • Making too many applications. While you may be concerned that your first application will not be approved, resist the urge to apply for too many credit cards or loans. Each application results in a hard enquiry on your credit file, which results in more points deducted from your credit score. Future lenders may also interpret your numerous attempts to obtain credit as an act of desperation and poor management of resources.
  • Overspending. Your spending habits probably needs to be reined in, and having too much credit on hand certainly doesn’t help. Consider lowering your credit limit instead, and take care to pay down your balances as quickly as possible.
  • Incurring more debt. Having one more credit card increases your likelihood of incurring even more debt. Take care to pay off your balance so that you aren’t racking up interest fees as well.

Ways to reduce credit card debt

Ultimately, your chances of getting a credit card depends on how long ago you experienced financial hardship and what your credit rating looks like now. The longer you can wait to apply for new credit, the better your chances will be of getting your application approved. If you’re still struggling to repay your debts, credit card issuers are not likely to extend more credit to you, and you’d be better off considering your alternatives and working on repaying those debts first..

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4 Responses to Can I get a credit card if I’m bankrupt or still repaying debt?

  1. Default Gravatar
    Jenny | June 24, 2015

    How do I go getting a low limit credit card? I am a discharged bankrupt for about 2 years now and I just want to rebuild my credit rating.

    • Staff
      Jonathan | June 24, 2015

      Hi Jenny, thanks for your inquiry!

      Please refer to the following link for a guide and process on how to fix your credit file/ rebuild your credit rating.



  2. Default Gravatar
    Lisa | July 24, 2013


    I am looking to see if I can get a credit card. I am currently have a bankruptcy on my credit file, but it is due to be off my file in a year. I have had a few loans with small providers since and my repayments have been all spot on. Is there a credit card I could apply for?

Credit Cards Comparison

Rates last updated October 21st, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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