4 Things to Know Before Applying for a Credit Card

Guest Post by Orlando Rodriguez

With so many options for credit cards floating around these days, how do you find the one that works best for your needs? If this is your first time getting a credit card, it can be a huge decision that’ll certainly have an effect on your finances. There are a lot of terms and conditions you need to understand before moving forward. And figuring these out is a daunting task in itself. But that shouldn’t turn you away from the benefits of getting a credit card. 

Once you’ve narrowed down your top choice for a credit card, now comes filling out an application. While it may seem a little overwhelming, it’s not as complex as you may think. First, you should consider a few factors about your personal finances that impact whether you should apply. 

Here are the top four things to know before applying for a credit card:

1. Start small
2. Make sure you can pay on time
3. Know the risks
4. Learn from rejection

1. Start small

If you’re new to credit, it might be difficult to qualify for cards with lower interest rates and big rewards programs. Your search should start with cards available for people with little to no credit history. However, that doesn’t mean you won’t reap certain benefits. Everyone needs to start somewhere when building up your creditworthiness. So, it’s a good first step to take. 

Try looking into card offers that help those with no credit or bad credit and find the options that work best for you. Often, secured credit cards have refundable deposits and don’t require a minimum credit score or history to qualify. This makes it easier to get the card and lets you choose your credit limit, making it useful in your budgeting. 

Even cards you prequalify for could be a good option, as well. These usually have a good idea of what’s in your credit report. And while you’re not guaranteed approval, you may be more likely to qualify for these than other cards.

2. Make sure you can pay on time

Missing a credit card payment is one of the worst credit card mistakes you can make. Before applying, consider your finances. If you’re already struggling with other debt, including credit card debt or collections, the last thing you should do is attempt to open another credit card.

If you need to open another card, one option is to look into getting a balance transfer credit card. This means you can transfer existing debt to the new card, potentially saving you money on interest repayments. Keep in mind, though, that the new card might have different rates and minimum payments. There can also be certain limits on how much time you have before paying off a balance without interest. Make sure you pay your bills on time to avoid additional fees.

3. Know the risks

Fees and penalties differ between credit card issuers. Study these carefully and refer back to your financial standing before continuing. While some cards with high fees or no credit limit offer valuable rewards programs, having to pay so much in interest might not sit well with your budget. 

Some of the main factors you should look at include the following:

• Annual Fees
• Balance Transfer Fees
• Interest Rates
• Foreign Transaction fees
• Annual Percentage Rate (APR)

Apart from these, look at what the credit card issuer offers just for opening a new card. Some might offer one-time cash bonuses or immediate cash back on purchases. However, read the fine print to determine how these work and whether you have to spend a certain amount for the reward to activate. 

The last thing to consider are penalties for missed payments. You’ll end up paying more interest on what you owe, but there are other factors that do a lot of damage as well. For one, missing payments will bring your credit score down. This, of course, has a negative effect on your financial future. It can lead to a reduced score, which means you won’t qualify for other credit cards or even mortgages. 

4. Learn from rejection

Getting denied for a credit card can be a huge letdown. For those with no established credit, the hurdle gets even bigger. But once you receive an official denial letter, it should lay out the reasons why you were denied, and you can use that as a learning opportunity. Sometimes, the rejection can be as simple as you don’t earn enough income, you don’t have a credit history, or you have other debts damaging your creditworthiness.

This feedback from the credit card issuer is helpful for many reasons. First, it lets you know what’s preventing you from getting a certain card. This, in turn, allows you to divert your efforts into other cards for which you’re most likely to qualify. And it also helps you know which areas of your credit profile you need to focus on to improve your score.

With this information, you can then change your approach and aim to apply for cards you can realistically qualify for. 

The bottom line

While a credit card offers a convenient and benefit-rich alternative to spending cash, it can also be an easy way to accumulate debt. For that reason, before applying for a credit card, understand your current needs and whether having a credit card aligns with your long-term financial goals. Gather as much information as possible and determine if the benefits outweigh the costs.

Credit cards offer a lot of incentives that draw you in, like cash back or travel rewards. But you need to know how to manage your credit properly or it could hurt your finances for years to come. Make sure you know your options and address any questions and concerns first. As long as you stay informed, you’re more likely to make the right decision and get rewarded. 

Orlando Rodriguez is a writer and content specialist for Credit.com dedicated to creating timely, factual, and eye-catching content. He completed his undergraduate work at the University of Utah focusing on Film and Media Arts. And he’s used his knowledge base in filmmaking and screenwriting to craft stories that enrich and inform. He’s written blogs and journalistic content for many different industries, and narrowed down his niche to the financial industry for the past two years. In his off time, Orlando enjoys reading and writing more about the arts.