7 Things to Consider before Applying for a Credit Card

7 Things to Consider before Applying for a Credit Card

Credit cards have become an indispensable financial product in current times. When used responsibly, they offer a lot of conveniences, however, they have the potential of being dangerous too if used recklessly. The first step towards using your card wisely starts with choosing the right card. With so many options to choose from, how to get a credit card that is right for you?    Keeping a few things in mind when you apply for credit cards can help you choose the best option for yourself. 

The Basic Requirements to Apply for a Credit Card

Applying for a card is fairly simple and can be done online with instant results. You need to fill a credit card application that requires basic personal details, your home address, and your income. If you are applying for a business card the business information will also be required. This can be done very easily online or on the phone.

 There are basic requirements that you will need to meet when you apply for a credit card:

  1. Minimum Age

The applicant must be at least 18 years old; if an applicant is below the age of 21 an applicant might need to show a verifiable source of income when they apply for a credit card.

  1. Social Security Number or ITIN

A Social Security Number or ITIN is a must when applying for credit cards. This is required to ascertain the credit health of an applicant, and to meet US Bank Secrecy Act regulations. Non-US citizens may be required to apply for a Social Security Number or an ITIN before they can apply for credit cards. Learn more about ITIN in the post below:

  1. Be Ready to Prove That You Can Make Payments

Credit card applications ask for the applicant’s monthly income. This is done to ascertain that the person applying for the card has the resources to repay their debt (retrieved from the credit bureau). The applicant needs to prove that they have a source of income they can reasonably access to to pay the credit card. Your reported income is one of the most important factors, based on which the credit limit of the card is decided. Sometimes proof of income is required to be attached along with the application.

7 Things to Consider Before Applying for a Credit Card

Choosing the right card in the maze of cards available today can seem to be a daunting task. Below we discuss how to apply for a credit card while keeping a few aspects in mind so that you choose the right card for yourself. 

  1. Check Your Credit Scores

Your credit history and credit score are extremely crucial when you apply for credit cards.  It is one of the most important factors in the issuer’s decision to accept or reject the credit card application.. Before applying for a card, it is advisable to check your credit score.  If your credit score is not good (below 660 – 680), it might be a good idea to delay applying for the card, while you work to improve your score.  A new card application will create an inquiry with the bureau, which will further reduce your credit score in the short term. 

Another option if you have a low credit bureau score could be to apply for a secured card or for a card that is designed for people with low scores.   This is a good idea when the reason for low Credit scores is a lack of credit history, or when recovering from old Credit delinquencies.  If you currently have too much debt, , you should wait and build your credit score rather than acquiring new debt. 

Credit cards that have less stringent application requirements when it comes to credit scores usually come with higher fees and interest rates. Choosing such a card is a decision that should be made carefully; however, these cards can, when used well, help you build your credit history. Knowing your credit score and health can help you determine which type of card to apply for.

For more information on improving your Credit Score, refer to this Plaata article

  1. Determine What Type of Card You Need: 

Different people may need cards for different reasons. The first step is to identify the reason for which you need a credit card. Certain credit cards help you build your credit score in case you are starting fresh or have had some financial setbacks. For those who rarely use a card but like to have one, a no-fee card could be a good choice. Similarly, a business person who needs to make purchases on their card may want to opt for a business card, which usually provide for greater spending capacity.

  1. Review Annual Percentage Rate (APR): 

Simply put, this is the cost of borrowing in case you do not pay the entire balance each month. APR of different cards must be compared to narrow down your choice to cards that have low APR, especially if you are looking at balance transfer or find yourself struggling with making timely payments.

  1. Review Various Charges and Cost: 

Often, card issuers advertise their cards as being free, but you need to read the fine print carefully to understand what other charges may be incurred. Some cards may waive off the first-year fee and may charge an annual fee from the second year onwards. Other charges to look out for are late payment fees, balance transfer fees, and the foreign transaction fee, especially if you need to use your card overseas frequently. Card companies may charge up to 3% as foreign transaction fees. This charge can easily be avoided by choosing the right card for you. 

  1. Choose a Rewards Card That Matches Your Needs: 

Rewards are one of the most exciting features for most of us. Credit cards offer some lucrative reward programs where each dollar spent through the credit card helps you earn some points that can be redeemed when traveling, goods and services, or as a cashback.

Credit card issuers offer bonus rewards when used for certain categories like groceries, travel, restaurants or gas. Thus, it makes sense to choose a card that allows you to earn points for where you spend the most and fits your lifestyle.

While rewards are tempting, do not spend extra just to earn some loyalty points. Cost of interest and carrying a balance will immediately erase financial benefit associated with the spend reward awarded. 

  1. Be Aware of promotional offers including Introductory Interest Rates: 

Some card issuers offer a low-interest rate or sometimes zero interest rate initially. The rate increases after a certain period. Cards offering low or 0% introductory APR may be lucrative for those looking to transfer their balance to a new card. When doing your research about how to get a credit card, do look out for how long the introductory interest rates last and also what the rate will be at the end of the introductory offer.

  1. Protect Yourself From Fraud: 

Last but not least are the security features of a card. Increased instances of identity theft and other types of financial fraud make this feature a priority when choosing a card. Cards from reputable lenders offer zero liability for unauthorized usage with very low hassle. If you shop online, you may want to choose a card that offers a temporary credit card number for a limited time for additional safety. In case a card is misplaced or lost it is very easy to stop any further activity on the card. 

In Conclusion

Now that you know what to look for in a Credit Card, you’re ready to start shopping for a Card that meets your needs.  Go to Credit Cards to quickly compare Card features and special offers to find the Card that’s right for you.

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