Tips and Techniques for Applying for Credit Cards

The easiest way to apply for a new credit card is online, though you also can apply in writing by mail or through an automated process by phone.  Online is convenient for most people though, as one can research all the different cards, all the different options that might be available, and then apply directly at the credit card company’s website for the card of one’s choice.

But what are some of the factors to look at in choosing which card for which to apply?

* Annual fee

You may want to just skip any card that comes with an annual fee.  It’s possible you’ll have no other options because you have bad credit, or it’s possible such a card will have so much else going for it as to outweigh the annual fee, but in general you don’t want to pay a credit card company for the privilege of giving them your business.  Often you can get this fee waived just by calling and asking, but it’s easier to simply go with one of the many cards that doesn’t try to impose such a fee to begin with.

* Interest rate

The degree of importance of this factor is a function of how likely you are to carry an unpaid balance from month to month.  If you pay your credit card bills in full every month, the interest rate will never be an issue.  If you don’t, then it will be.

Checking the interest rate on a card you’re considering is not as straightforward as it sounds.  Often there are several aspects to consider.

One, there may be both an introductory rate offered for a certain finite period of time to entice you to sign up, and the permanent rate that it then switches to after the introductory period.

Two, there is usually a provision that allows the credit card company to bump up the rate, sometimes hugely, if you miss a payment or otherwise violate the agreement.  Check what the conditions are that allow it to do this, and check the rate to which it would rise.

Three, interest rates can be “fixed” or “variable.”  Fixed means the rate is a specific percentage; variable means the rate varies with some indicator it is tied to, usually the Prime Rate.  So a fixed rate might be 12.9%, and a variable rate might be Prime Rate + 8%.  Calculate what the current rate for a variable rate card would be, then factor in whether most analysts expect the Prime Rate to rise or fall from where it is now.

Beyond that, it isn’t that fixed or variable is necessarily “better” than the other, though some people have a preference for fixed because it’s more stable and predictable.

* Other terms

For instance, check the grace period on purchases.  How soon do you have to pay a purchase off before it starts accumulating interest?  Check the details on cash advances.  Do you have to pay an extra fee in addition to interest when you take a cash advance?

* Perks

In addition to offering reduced rates for a special introductory period, credit cards often come with other enticements.  These include cash back, or special credits good toward certain purchases, most commonly airline travel.  Some cards offer special bonuses to certain classes of people, such as students.

* Limits

If you’re interested in a card with at least a $10,000 limit, don’t bother looking at the ones with $1,000 limits.  On the other hand, if you expect to use the card only infrequently and for small purchases, you don’t need to look for high limits.  In fact it could even hurt your credit score if you’re carrying so much potential credit that it’s out of proportion to your income.

A more general tip to keep in mind about applying for credit is that which cards are available to you is affected greatly by how good or bad your credit is.  If you have the kind of credit a credit card company likes to see, they’ll compete with each other to offer you great interest rates, perks, etc.  If they see you as a bad risk, you’ll at best be able to get cards with undesirable terms.

So a key to choosing a good credit card is to make sure you keep your credit score as high as you can, so as to have good credit cards available to you to choose in the first place.