Factors to Consider When You Apply For a Credit Card

When you apply for a credit card, you’ll want to take several factors into consideration.  Most credit cards promote their perks – things like transfer balance offers, introductory interest rates and rewards credit card programs; but you need to take a closer look at the whole picture to select the best credit card for your needs and not be swayed by the “perks”.

Credit Card Fees

The first thing you need to look at before you apply for a credit card is what kind of fees the card will charge you.  Is there an annual fee for using the card?  Is there an annual fee for participation in the rewards program?  What are the over-the-limit fees? How much does the card charge for late fees?
What is the annual percentage rate (APR)?  It’s not as important what the introductory or promotional rate is – because that is only temporary. You need to know how much the rate will be long term, once the promotion or introductory offer comes to an end.  Your goal is to select a credit card that has the lowest APR you qualify for.

Credit Limit

When looking to apply for a credit card, you also need to consider the credit limit you’re offered.  This is the amount of money available to you for balance transfers, new purchases, and cash advances.  If you don’t pay your balance off in full each month, and finance charges or late fees put your balance over-the-limit, you can expect to pay a late fee.  The amount of credit you’re offered will vary depending on your credit score and income level.

Should You Apply for a Secured Credit Card or an Unsecured Credit Card?

The difference between a secured card and an unsecured credit card is that you must make a deposit as collateral for a secured card.  The money you deposit is the “security”, and is typical the amount of credit limit you have available.

A secured credit card is a good option for people who have a low credit score and are looking to rebuild it; or people who have not yet established credit.  If choosing to apply for a secured credit card, make sure it’s one that will report your on-time payments to the credit bureaus.

An unsecured credit card is the most commonly used credit card, and offers a higher credit limit.

What is the Grace Period?

Before you choose to apply for a credit card, you should also take a look at the grace period.  How long do you have to pay your credit card balance in full each month they start adding interest charges?  This is important for anyone who intends to pay their credit card balance off in full each month.  The most common grace period is 25 days – meaning you can make all purchases the same as cash, without paying interest, if you pay off your balance within 25 days.  If you carry a balance from month to month, the grace period will not make any difference to you.

Credit Card Perks

Finally, if all of the factors above are considered, you can then take a look at various credit card perks to make your final decision for which card to apply for.