What to Look Out For When Applying For a Credit Card

Choosing the right credit card for you is crucial. If you use a credit card in the wrong way or pick the wrong credit card that is not suited for your needs, credit can easily become debt. Before you fill out a credit card application form, it helps to take the following into consideration:

1)      Why am I applying?

Ask yourself why you want or need this credit card and think about your spending habits. Do you want a card that has low or no annual fees, low interest rate, or a good rewards program? A credit card suitable for one person’s needs may not be suitable for another person’s needs. For example, if you pay off your credit card balances every month, you probably don’t need to look for a credit card with the lowest interest rate because you won’t have to pay any. Instead, you might want to look for a credit card with no annual and transaction fees, and a good rewards program.

2)      How does this credit card compare to others?

If you’re applying for a credit card, chances are you are comparing different credit card terms. When you receive a credit card offer in the mail, it may be tempting to apply right away, but the card may not be the best option for you. It is hard to choose and unreasonable to apply to a credit card when you are only looking at one in insolation. This is why it is important to do a side-by-side comparison of several different credit cards before you apply to help you determine the right credit card for you. Narrow down your options as much as possible.

3)      What is the regular APR?

You may receive a credit card application in the mail offering 0% interest rate for one year. Understand that this is only an introductory APR and after one year, when the introductory rate usually expires, you will be paying the regular APR rate. Find out what the regular APR rate is, since that is what you are really buying. If you are not planning to pay your credit card bill in full and going to carry a balance at the end of the month, then you should look for a credit card with the lowest possible APR. Keep in mind that, even with a fixed interest rate card, the interest rate can change based on certain triggers, such as paying your card late or going over your credit limit.

4)      Fees and penalties

Common charges include annual and transaction fees, such as balance transfers and cash advances. There are also penalty charges for maxing out your credit card or paying your bill late. For balance transfers, look for cards with no transaction fees. With annual fees, a person may be willing to pay a higher amount to get a credit card with the lowest interest rate or the best rewards program. People might choose to do this if they plan to use their credit card for most of their purchases, thus receiving generous rewards, or if they plan to carry a balance at the end of the month.

5)      What is the grace period?

Some credit cards start charging interest immediately. If you are one who doesn’t remember to pay off their bills right away, you want to make sure you have a grace period long enough so that you pay off your bills without being penalized.

6)      What is the credit limit?

This is the maximum amount of money that the credit card issuer is willing to let you borrow. If you plan to use this credit card for most of your purchases, try to look for a credit card with a large limit. Although you can max out your credit card by going over the limit, this is not something you want to do. Even going near your credit limit will hurt your credit score, and some issuers may even cut customers’ credit limits to a lower amount if they foresee this as risky behavior.