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10 Factors to Consider Before Applying for a Credit Card

In today’s society, having some debt hanging on your neck is becoming almost inevitable. But having a credit card is a smart way to take charge of your debts, keep your finances in order, and even increase your credit score and worthiness. Having a credit card is now becoming even more essential, not only because it makes your pocket lighter, but because it also gives you access to emergency money whenever you need it.

Credit cards also give you preferential treatment at places like airports and shopping malls. Lastly, credit cards come with alluring rewards if you can pay your full balance off every month. However, using a credit card is not suitable for everyone. Before applying for one, you need to really ask yourself if it’s a suitable option for you. Here rare 10 factors you need to consider before going ahead to apply for a credit card:

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10 Crucial Factors to Consider Before Applying for a Credit Card

1. Your spending habits

The first questions you need to ask yourself is how you intend to use the card. Will you be using it for emergency payments or to pay for everything? Are you sure you can pay off your monthly balances without fail? If you are going to pay your bill in full every month, then you might not bother about the interest rate. Go for a credit card with no annual fee and a longer grace period. But if you are going to carry a balance, go for a card with the lowest interest rate possible.

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2. Interest rate

A credit card comes with the obligation to pay interest. This rate can be fixed or variable. With a fixed-rate card, you can know what the interest rate will be from month to month. But a card with a variable rate can fluctuate. However, even the interest on a fixed-rate card can change due to certain factors, such as late payment or exceeding your credit limit.

3. Credit limit

Your credit limit is the maximum amount of money your credit card issuer will allow you to borrow. This could be anything from a few hundred dollars to thousands of dollars. You sure don’t want a situation where you will have your spending restricted or you get close to maxing out your credit limit. This can hurt your credit score.

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4. Fees and penalties

Banks and credit card issuing companies can make money off you in many ways. Typical charges applicable on credit cards include transaction fees, balance transfers, and cash advances. There are also penalties for later payments or going beyond credit limits.

Before apply for a card, you need to consider the applicable fees and penalties, and choose cards with reasonable fees. For example, on balance transfers, choose cards with no transaction fees and zero percent interest for at least 12 months.

5. Incentives

Many credit card issuers offer incentives to attract potential customers. They also offer rewards to customers who pay their monthly bills on time. Some rewards come in the form of cash backs, where you will get your cash refunded after making a purchase. Other card issuers offer travel ticket, coupons, gift cards, and other rewards you can redeem easily. However, you must bear in mind, however, that these rewards expire if not redeemed on time. It goes without saying that you should apply for a credit card that comes with generous rewards.

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6. Balance computation method

If you are opting to carry a balance, you need to find out how it is calculated. Most commonly, the daily balances are added together and the divided by the number of days in the billing cycle. This gives what is known as the average daily balance. Avoid cards that use two billing cycles.

7. Online banking experience

Before applying for a credit card, you need to find out if the card can be used for online transactions. Can you transfer funds and purchase products and services online? Although, most cards are by default enabled for online banking, some are not.

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8. Repayment terms and grace periods

While you should try as much as possible to pay off your monthly minimums, you must protect yourself in advance by finding out whether your card offers a grace period and what late payment fees may incur if you fail to pay during the grace period. Remember, your credit score will suffer if you pay late.

9. Ease of application

While applying for some credit cards is usually a breeze, the process might not be straightforward with some issuers. Typically, you will need to provide your Social Security Number, tax ID number, and so on. Find out if you can easily produce the requirements or not. You don’t want to get stuck during the application process because you are requested to provide a document you don’t have.

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10. Reputation of the issuing company

The reputation of the bank or credit card company is always a worthy consideration. If a bank or credit card company doesn’t have an established reputation of being trustworthy, never apply for their card.