8 Questions To Ask Yourself Before Applying For a Credit Card Online
Credit cards can either be extremely useful financial tools or the path to financial ruin, yet it’s become easier than ever to get one. Applying for a credit card online is quite simple. The process lasts for a few minutes and you get a response in the same day. But should you get a card?
Here are eight questions you can ask yourself before applying for a credit card
- Why are you applying for a credit card?
You should never get a credit card just for the sake of having a credit card, even if you don’t have one at all. It’s harder to find a good credit card if you have no existing credit history, but you can still find a card with some kind of rewards program.
A credit card should be a tool to build your credit score and maybe earn some rewards along the way. It shouldn’t be a way to expand your ability to take on debts or something you acquire on a whim.
- How do you plan to use it?
This is directly connected to the first question, but it’s worth getting into the nitty gritty details. Are you keeping it as a backup for emergency purposes? Using it only for online purchases? Trying to maximize your rewards and travel for free? Each approach works best with a different type of card.
If you’re trying to maximize your rewards you’ll need to take this even further and create a detailed strategy including how much you’ll spend each month and when you’ll pay it back.
- Are you trying to build or rebuild your credit score?
There are two parts to this question. First, if you have a low credit score your options for a new credit card will be quite limited. You may even have to get a secured credit card.
Second, if you’ve got a moderate credit score and you’re actively working on it, you may not want to apply for a new card yet. Every time you apply for a new credit card a hard credit check is done, and these can temporarily drop your credit score.
- What kind of rewards do you want?
You should always be looking at cards with rewards programs, unless you’ve been bankrupt and you need a secured card. The kind of rewards program you choose should be directly relevant to either your current lifestyle or your desired lifestyle.
If you’re content with where you are and all you want is to save some money, get a card that rewards you for making everyday purchases. If you travel a lot or you want to travel, look for a card that offers air miles and doesn’t have foreign transaction fees.
- What’s the regular APR?
Many cards offer a 6 to 18 month 0% promotional rate, but once the time is up, charge an incredibly high-interest rate. This is a particularly common trick used with credit cards from furniture stores and other big box stores, whose APR can then go up to as much as 25%.
Always read the contract thoroughly and look for the regular APR as well as the promotional rate. A card with a long promotional period and a high regular APR might still be worthwhile, but you should always try to choose a card with a low APR when possible.
- When do rewards expire/when can they be revoked?
Many credit card point systems have rewards that expire on an annual basis. This encourages you to spend a lot of money fast to earn points, and then rush into spending your points before they expire. Look for a card that allows points to be redeemed so long as you still have the card.
It’s also worth asking what the policy on revoking points is. Some credit card companies will say they “may revoke points for any reason”, but they’ll still have an internal policy. You want examples of the circumstances in which points have been revoked.
- What other fees may apply?
The credit card you’re considering may come with an incredible offer, but come with a catch in the form of large fees. Cash advance fees, balance transfer fees, and late payment fees can rarely be avoided, but these are the only fees on many credit cards.
Fees to watch out for include termination fees, application fees, processing fees, and over-the-limit fees.
- Is the application process and online account management safe?
You should only apply for a credit card on a secure website. Look for “https://” at the beginning of the URL instead of the regular “http://”.
Other signs of a secure website include a padlock or key at the top or bottom of your browser, a privacy statement, and a two-phase login process.