5 Things to Know Before Applying for a Credit CardAugust 8, 2011 - 8:05 am
When you are looking to secure a new credit card but haven’t applied for one in a long time, it may be in your best interest to take a closer look at how things have changed. What you don’t know about today’s credit card can cost you not just cash but also your ever-important credit score.
Here are 5 things you may not realize about a new credit card:
Credit Is Harder to Get
Because of the recent troubles in the credit industry, credit card providers are taking a much closer look at consumer credit scores before approving card applications. If your credit is below 720, you are likely going to get higher interest rates and lower credit limits attached to your account. Your credit should be in great condition before applying for the new credit card if you want the most options and faster credit approval.
Credit cards rewards programs can be a great incentive if you apply for a credit card that has an incentive program that makes sense for your spending lifestyle. It is also important that you follow the program rewards rules to get the most out of the earnings you are entitled to use. Credit card rewards vary between different card companies. Some are better than others so it is worth your time to investigate what is out there. Due to cutbacks on the part of the credit card companies, many rewards programs are not what they used to be so be sure to understand what you are really signing up for before committing to a card.
Balance Transfers May Be Unaffordable
When you are looking to get a credit card with a balance transfer option as a way to consolidate your other credit card debts, it is important to read the fine print. Balance transfer credit cards, even those with 0% introductory rates, can end up costing our more money than you can afford. First, there are transfer fees usually based on the amount of money you transfer over to the new card. Secondly, if you do not have a plan in place to pay off the transferred debts before the promotional period ends, you can end up with a balance much too high for you to handle.
Shorter Grace Time Period
Many credit card companies are looking for loopholes in the new rules. One way companies make more profits on consumer fees is to shorten the grace period from the traditional 30 days to 20 days or less. Some cards don’t even have a grace period and expect payment in full as soon as possible. Make sure you understand the time frame established for the credit cards you are interested in.
Plans to Pay
Before any consumer applies for a new credit card, there has to be some though put into the financial side of things. Consider the reasons for wanting a credit card. If it is to be used as a method for extending your income, reconsider getting a credit card at this time. If you plan to benefit from the rewards and incentives or utilize your credit card to boost your current credit score, make sure you have a plan in place that enables you to pay off your full balance each month. If you only can pay the minimum, you’ll soon find yourself over your head in debts and financial problems. A budget is a good place to start to find out how much cash you can afford to allocate to your credit card purchases. The smarter you are with your credit card usage, the more effective you will be with financial management.