Things to Consider Before Applying for a Credit Card

Jennifer Winget By Jennifer Winget, 17th Feb 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/38ttwt64/
Posted in Wikinut>Money>Credit Cards

Credit cards, if used wisely and with discretion can act as immensely helpful financial tools. Hence before applying for a credit card one needs to consider things like the interest rates, one’s spending capacity and credit limit, understand lenders’ psychology, compare various cards and ensure making timely payments.

Applying for a Credit Card

The tiny pocket size credit card harbors potential galore to help you make payments with convenience without having to apply for a loan every time you need to pay a substantial amount. It is also up to you how you decide to pay the amount, of course after paying the minimum account. But just as it acts as a handy financial tool in your hand, improper usage of credit cards can land you in doldrums. So before signing on the bank’s agreement and applying for a card, here are 6 things you must consider to ensure that you are ready for it financially and know just the way to handle the card to the best of its potential.

Your Spending Needs and Limits:
The very first question you need to answer is the way you are likely or have intentions to use the card. Will you be using the card for purchasing and paying off bills or would like to keep it aside for emergencies? How do you intend to make the payments every month- the whole due amount in its entirety or by paying the minimum amount and carrying over a balance every month? If you are taking the card to meet emergencies, it is worthwhile to go for a card that comes with low fees and reduced interest rates.

For those who are confident about paying off the whole balance on the card every month it is better to look for cards with discounts and rewards and without an annual fee rather than the APRs as the latter will not matter to you in this case. On the other hand, if you plan to carry a balance forward each month, look for a card with low fixed rate or APR to cache in quite some amount in the end. Also, gauge just the credit amount limit you would need to suffice for your purposes rather than being lured by a high limit card, which will trigger off unnecessary expenses with consequent higher interest rates and thus land you up in trouble.

The Card Interest Rate:
Interest rates also referred to as Annual Percentage Rates or APR can come in either fixed or variable rates, the latter being associated with the prime rate or any other financial indicator. The range of interest rates can go from 0 per cent and balance-transfer discounts for specific period to as much as 30 percent. If you are opting for a balance-transfer card to pay off the amount due in another card, beware of cards, which might seem tempting with “teaser rates” or low rates like 0 percent APRs in the initial period but catapult to high rates post the completion of the promotional period.

Gauge Lenders Perspectives:
just because those credit card companies and bank personnel are coaxing you, the whole day to take a card does not indicate that you are placed at a privileged pedestal where you are deemed as someone eligible for more credit. In fact, on the contrary they may be considering you a good bet who is likely to carry off a big balance and therefore pay a good amount as interest too.

Compare Features:
Comparing cards is an imperative step before you sign on one of the form’s dotted lines. For your convenience, create a spreadsheet and jot down features of various types of cards available to you for comparison. The parameters should include things like the Annual Percentage Rate, Annual or Monthly Maintenance Fees, Grace Period, Promotional Rates, Special Offers, Rewards and Discounts, Fees and Penalties and other such factors. Get your magnifying glass and take a close look at all these factors to pick out the card that will prove to be financially helpful.

Importance of a Good Credit Record:
Make sure you are financially ready to apply for a credit card. If you falter in making timely payments, you will accumulate interests and end up paying more. Additionally, failure in repayments hits your credit score badly which in turn makes it difficult for you to get approved for loans in future.

Read through the Contract Terms and Conditions:
Finally, before submitting the form, ensure you have gone through the fine print and check out the period when free credit is offered to you, what are the charges inflicted if you miss out on a month’s payment, the date from which interest will be charged and so on. Many companies even charge you for not using the card frequently or for being inactive as well.

Remember, the secret to handle a credit card wisely is to stave off being a spendthrift and use it within your spending limits making payments on time and without faltering to build a good credit record.

Tags

Credit, Credit Card, Credit Debt Help

Meet the author

author avatar Jennifer Winget
I am a marketing professional. Apart from my profession i love writing and sharing information related to business, technology, health, fashion and financial services.

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Comments

author avatar Fern Mc Costigan
18th Apr 2014 (#)

Thanks for the tip!

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