What you need to know to Apply for a Credit Card

Credit is readily available, even to those with a bad credit history. What one ought to know and what one needs to know are two different things when applying for a credit card. The consumer needs to know no more than where to sign on the dotted line. There is no remit in place which requires a credit card provider to question how a consumer will manage this latest financial obligation, nor a financial literacy test to see if they are aware of how a credit card works. It is up to the card applicant to acquaint themselves with the details of how plastic works, and how to avoid any potential pitfalls.

What every consumer ought to know when applying for a credit card is that responsible use of credit can help to establish and build a good credit score. Equally, irresponsible use of credit cards can have a detrimental affect on ones credit reputation, which takes far longer to repair than to harm. A good credit score is vital in so many areas of life that an excellent credit history can open doors to employment, lower insurance rates, and preferential interest rates that could save literally thousands of dollars over the course of a mortgage or loan.

Consumers should know that responsible use of credit can actually net a financial return in the form of cash backs or reward points which can be redeemed for something of monetary value. Ironically credit cards best serve those who have no need to borrow and simply utilize credit cards to take advantage of interest free transactions until the monthly payment falls due, at which point the balance is cleared in full. During the grace period money can be earning interest elsewhere. Cardholders who never carry a balance should look for card features which will benefit them and disregard the interest rate as immaterial.

Many consumers on the other hand use their credit cards to purchase items they cannot afford to pay for at the time. If this is the case it is imperative that the interest rate charged on the card is known. Cardholders who carry a balance will pay interest on the full outstanding balance each month, and those who choose to only make minimum payments will pay compounded interest on the interest outstanding. Those who handle their credit cards in this way are skating on thin ice as the debt they accrue can easily become out of control.

Credit card bills must be paid on time or late payment charges are applied. However, paying late carries more serious consequences than simply an additional charge. Penalty interest rates in the area of 30% can be levied on cardholders who pay late, and will not be assessed until six months have passed. Many have fallen foul to this by failing to read the terms and conditions, and suddenly find that their interest rate has increased drastically from the 0% APR they signed up for. Late payments are also recorded with the credit bureaus thus lowering credit score.

Card applicants should be aware that credit cards are not recommended for obtaining cash as this action carries a high interest rate with no interest free period. Borrowing $100 on ones credit card will cost an average 24% in interest, plus a fee for the pleasure.

Many credit card providers will simply refuse an application if the applicant has not demonstrated a good credit history, thus it helps to know ones credit score before applying. With this knowledge one can search for a provider who offers cards to those with bad, poor, good or excellent credit, thus avoiding multiple applications registering on ones credit history.

There really is no requirement to know anything before applying for a credit card, but the excuse of ignorance is not a valid complaint when the card issuer applies penalties and charges. It is up to each consumer to acquaint themselves with the terms and conditions of the card they apply for, or face the consequences.