Credit cards are very handy tools but you need to be sure that if you use them, you are capable of eliminating credit card debt some stage in the future. Credit card debt is generally expensive and should be among the first on your list for removal.

Getting into debt is easy but getting out again is much harder and involves a disciplined approach if you are to be successful.

Here are some steps you can take to help eliminate your debt:

Take Responsibility

Some people will blame circumstances out of their control for increasing debt. For short periods of time this may be true but in the long run you need to own the responsibility for your spending. There are always options to funding purchases and you need need to decide where the money will come from and if you really need to spend. The decision not to spend may be the best for you.

Make A Positive Decision To Get Out Of Debt

• To get out of debt you will need to do things differently.
• There is an old saying that “today is the first day of your life”. Treat it that way. Forget about the past, its gone and you cant change what has happened. What you can do though is ensure the actions you take in the future get your finances going in the right direction.

Build A Plan

• It is really important to have a written plan to guide you on the road to recovery.
• First take an inventory of all your debt. List everything you owe, to whom, what the annual interest rate is and what the minimum payments are.
• Next look at your ability to pay. Make a list of all your income then subtract off your expenses excluding credit card payments.
• The balance is what you have available to pay off your debt.
• Now look for ways to either increase your income or reduce your debt. Finding a second job or stopping smoking are examples of the things you should look at.

Prioritise  Payments

• Next prioritise debt payments. You will want to bring up to date those debts you are behind on first, then once they are up to date, focus your payments on those with the highest interest rate.
• By focusing on those accounts with the highest interest rate you will pay less in the long run for your debt.

Take Action

Now that you have made a decision to eliminate your credit card debt and you have a written plan you just need to take action. A lot of people get themselves  into serious trouble when they know what to do, but just don’t take action.

Some suggestions for tactics to use when putting together your plan:

• Low interest rate balance transfers. Look for a card with an offer that if you move your debt across to a new card you will get a reduced interest rate for a period of time. If the period of time is long enough for you to get rid of your debt this may be a good option for you. If the offer doesn’t meet the time it will take to reduce debt then ensure you can switch the debt to another similar offer, just before the original offer expires.
• Look at debt consolidation. If you put all your debt in one place, with a reduced interest rate the debt is often easier to manage and will make it easier for it to be paid off.
• Always pay as much off your credit card as possible. Never just make the minimum payments.
• Serious look at cutting up one or more of your cards. This helps remove the temptation to put more debt onto you cards.

Many people look to get credit cards after bankruptcy. They do so with good reasons. It could be they are looking for some spare money as they get back on their feet or just to rebuild a credit rating.

Whatever the reason it is possible and with careful management will build credibility back into your credit rating.

With recent economic events banks will carefully scrutinise any credit card application. But when you apply at least the law change of 2005 extending the time of filing between bankruptcy motions is in your favour. The extension of  the times has made it less risky for banks to lend to you and they will consider a credit card after bankruptcy more favourably.

There are a number of options for getting a credit card after you have been adjudged bankrupt:

Payroll Deduction Cards

For this option you need to have a steady job and probably have been in employment for at least 6 months.

With this option a fixed amount is deducted from your pay check each pay.

The amount you can borrow is determined by your base salary.

Unsecured Credit Card

Generally harder to get than other secured cards. They are good for improving a credit rating but may have higher fees and interest rates than other cards. This is because the bank is taking more risk with a secured card than it is with this type of card.

When looking at this type of credit card try to find one with no setup fee, low annual fees and low interest rate.

It is considered good practice to pay outstanding balance off your card each month. If you can do this then the interest rate will not be so important to you.

Secured Credit Cards

These have traditionally been the cards used after bankruptcy. They were able to be issued at least 6 months after the judgement. They require a cash deposit which is used as the credit line for the account.

After a while, when the bank can see you have your spending and repayments under control they may extend you credit limit past that which was originally agreed.

As long as your bank regularly reports to credit agencies your credit score will improve as you display an ability to make regular payments.

These cards often have higher annual and establishment fees than other forms. Always look for a card which has no application fee if this is an option you wish to take.

Also look for a card which converts to an unsecured card in 12 months. This should reduce any annual fees.

Irrespective of the type of card you get, here are some suggestions for the management of your credit cards:

Never carry any due amount forward. Always the the entire card off each month.

Always pay on time

Satisfy yourself that the credit card company reports payments to credit rating agencies. If they don’t then your credit card score will not improve.

Don’t apply for too many cards at once. In fact the opposite should be your practice. Keep you credit card debt to a minimum, have on card only, and use other (cheaper)  forms of credit for any borrowings you may need.

When in bankruptcy get a secured card. Never spend more than 25% of the credit limit and pay the account in full as soon as the bill comes in. Maxing out the card even if you pay it off each month is not good for your credit rating.

Following bankruptcy credit repair is one of the key goals to focus on.

While bankruptcy may prevent you borrowing for some time, you know that at some stage in the future there will be a requirement to secure a loan. When the time comes your credit score needs to be as high as possible.

Some important steps you can take to improve your credit rating are:

• You are allowed one free credit report per year. Get a copy  and look for any errors .   Contact the agencies directly and have them put right. Your lawyer may help with this.
• Get you remaining debts under control, consolidate them if necessary and ensure regular payments are made.
• Make all your payments early if at all possible.
• Ensure that your lenders report your payments regularly to  ratings agencies.
• Be very careful about taking on any more debt, you need to be 100% sure that the debt can be serviced.

Your objective is to demonstrate to your creditors and credit agencies that you are now in control of your spending and are able to repay any money owed. Its a matter of building up trust again. This will take a long time and you should not expect instant results.