Credit card applications are easily available to anyone who needs a credit card. Credit card companies regularly send pre-approval offers to people with good credit. In addition, many credit card companies include credit applications on their websites. This is certainly convenient, and if applying online, you can receive a response in a matter of minutes. But before you apply for a credit card, there are 5 important questions to consider.
What is your credit rating? Many people don’t check their credit rating before applying for a credit card. However, knowing your credit score provides clues as to whether you’ll be approved. Creditors are picky and some only work with people with excellent credit. Not to say that you can’t get a credit card with bad credit, but you will need to apply with the right creditors.
Go to Myfico.com and order your credit score. If your score is 680 or higher, you can likely get approved for a prime unsecured credit card with little problem. But if your score is less than 680, your options include a credit card for people with fair credit or a secured credit card.
What is the interest rate? Credit card companies are required to disclose interest rates on credit card applications. It’s your responsibility to read the fine print and find this information. When stating the interest rate, credit card applications include a range, such as 10.99% to 20.99%. Applying for the credit card — even if you receive a pre-approval letter — doesn’t guarantee the best interest rate. The best rates are subject to good credit and the creditor will check your credit before assigning a rate.
What are your spending habits? Assess your spending habits before applying for a credit card. This can dictate the best credit card for your lifestyle. For example, if you use credit cards for everyday purchases, such as grocery shopping or gas, you might benefit from a rewards credit card. These credit cards let you earn cash back on everyday purchases or points toward travel. But if you’re not a big spender and simply need a credit card for an emergency, you can skip the rewards program and apply for a no frills credit card.
What is your number of recent applications? Before applying for a credit card, consider your number of recent credit applications. People unfamiliar with credit scoring don’t realize the damaging effect credit applications can have on their FICO score. Each inquiry can reduce your credit score by 5 or more points. Thus, it’s best to spread out applications. If you recently applied for credit, wait about three or four months before completing a new application.
What are the details of the introductory offer? Credit card introductory offers are a major incentive, but they do expire. A credit card might offer 0% interest on purchases for the first 18 months, as well as waive the annual fee for the first year. You might jump on these offers, but read the fine print and know the details of the offer before signing up. Zero percent may only apply to purchases and not balances transfers. What’s more, the fine print of your credit card application might reveal that your creditor can cancel your 0% rate if you’re late on a single payment.