Credit Card Applications
From LoveToKnow Creditcards
Most people receive a flood of credit card applications in the mail each month. Before you fill out an application and stick it in the mail, you should read this article to understand exactly what you are applying for.
Understanding Credit Card Applications
Credit card companies make a great deal of money off of consumers like you. It is a competitive industry, which means you should shop around and compare different credit card offers before submitting an application of any kind.
Shopping around allows you to compare the different benefits and interest rates that are offered with different types of credit cards. The main factors to focus on include:
- Introductory annual percentage rate (APR)
- The intro APR period
- The regular APR once the introductory period is over
- Whether or not there is an annual fee
- Whether balance transfer are available
- What type of credit you will need in order to qualify
Before you apply for the credit card, you should also make certain that you have a good chance of qualifying for it. If you have a large number of credit card inquiries on your credit report in a short span of time, you may look like a high risk consumer. As a result, credit card companies who do approve you for credit will charge you a higher rate.
Not All Credit Cards Are Created Equal
Credit cards can be a valuable and useful tool. They give consumers the opportunity to build a credit history. Credit cards are also very useful when an unanticipated emergency crops up in your life. If your car breaks down, you can use your credit card to rent a car to get to work while the car is in the shop. Without a credit card in that situation, you may be forced to rely upon friends, co-workers, or public transportation.
Unfortunately there are also some bad credit cards. You may want to avoid credit card applications for these types of cards.
For example, bad credit cards have extraordinarily high interest rates. If you have a high credit rating (also known as a good FICO score), then you should not apply for a credit card with a high interest rate. On the other hand, if you have a low credit rating, the only credit cards available to you may carry a high interest rate.
Also, be wary of so-called “secured credit cards”. A secured credit card requires you as the consumer to main in a security deposit equal to the credit limit of the card. These credit cards usually carry very high fees and interest rates. The only time you should consider such a card is if you have a low credit score. With a low score, a “secured credit card” may be the only type of credit card available to you.
Common Types of Credit Cards
- If the credit card application offers a 0% APR feature or balance transfer credit card, then this card will give you the benefit of using credit without making any interest payment on the principal for a specific period of time. This credit card is usually only available to people with good credit rating. If you know that your credit score is low, you should avoid these credit card applications.
- If the application offers cash rewards, then this card will allow you to earn a percentage on purchases made with the card. This reward is usually directly credited to your account each month.
- If the application offers a prepaid credit card, then the card will have a spending limit that is equal to the amount of money you loaded to the card. The company giving you the prepaid credit card has zero risk because you can only use the money you load to the card; therefore, these cards are designed for people who are with poor credit or unemployed.
- If the application offers a secured credit card, then the card is secured by the amount of funds you have in your account. This type of card works just like a prepaid credit card, except with a secured credit card your credit line could be from 50% to 100% of your deposit depending on the company issuing the card.
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