What to Know When Applying for a Credit Card

Purpose

Your reason for applying for a credit card may affect how responsibly you use it. If you are applying only for rewards, ask yourself if the rewards are worth the risk to your credit if you overspend. If you are already having difficulty making ends meet and are looking for another card to cover expenses, consider visiting a credit counselor for help. Make sure your spending habits are in order and you are prepared to handle the financial responsibility of a credit card before you apply.

The type of card you apply for is another consideration. Secured credit cards require you to make a deposit. Your credit limit is equal to the deposit amount or slightly higher, depending on the specific account. This option helps you avoid overspending while establishing your credit. The major credit card companies, like MasterCard and VISA, back credit cards through a variety of stores and organizations. A standard card allows you to charge and pay off your balance over time. A reward card gives you additional benefits as a reward for using the card.

The annual percentage rate, or APR, represents the amount you pay in interest on the credit card balance. Your credit history plays a large role in determining the specific APR you qualify for on a credit card. In some cases, the credit card company offers you a lower rate initially to entice you to apply for and use the card. Read through the details to determine if the rate you are quoted is a temporary introductory rate. If you charge a high amount on the introductory rate but don't pay it off, you could end up with a much larger balance once the higher interest rate begins.

The interest rate is only one aspect of the credit card to consider when applying. Read through all of the fine print to ensure you understand all of the terms and restrictions of the card. Check for any fees you may be charged, including annual fees, late payments, over-limit fees, balance transfers or cash advances. Look for a card with lower fees and no annual fee if possible. The grace period for paying off a charge before interest begins is another detail to consider.