So, you want to get a credit card, but you’re not sure of the best way to go about getting one.
When my relationship ended, I had to get my own card, but I had no idea where to start, or what to look for.
This guide covers how to get a credit card, but first let’s go over the benefits of having one.
According to statistics, the market size for credit cards in the United States was nearly one trillion U.S. dollars higher than that of debit cards in 2018.
If you’re a newcomer to your country or a young person who doesn’t have a credit history, credit cards can be a great way to build or improve your credit. It can also be a great way to destroy the credit that you’re building, if you don’t use it responsibly.
Credit cards also offer more protection than paying for a product or service with cash.
If a company you buy a product or service from doesn’t deliver, then you can petition your credit card company to charge them back. In which case, you get your money back, if the card company sides with you.
Credit cards also offer cardholders various kinds of insurance.
Insurance coverage ranges from extended warranty and short-term protection for the physical items you purchase with your card, all the way to travel medical and trip cancellation insurance for travel arrangements that you normally could not cancel.
1. Decide What You Want from a Credit Card
Before choosing a card to apply for, you should know what you need, and what you’ll be using your credit card for.
Do you want to have a credit card so you can start building credit?
Or maybe you already have excellent credit, and you want to be rewarded for your purchases?
If you’re looking to get credit card rewards, you should figure out where you spend the most money.
There are cards that give higher rewards for spending at grocery stores, gas stations, and restaurants, as well as on travel.
When you know where you spend the most, you can choose a card that gives you extra rewards for spending at those types of places.
Maybe you’re looking for a credit card with certain features or benefits.
When you know what you want to get out of a card, you can narrow down what kind of card you’re looking for.
2. Learn About the Different Types of Credit Cards
Now that you have figured out what is most important feature to you in a credit card, check out the different types of credit cards, and who they’re designed for. This will give you a better idea of what kind of card is right for you, and it’ll help narrow down which card is right for you.
3. Know What Features You Need in a Credit Card
Now that you’ve chosen your perfect credit card type, you’ll want to narrow down your credit card search even further, by choosing a credit card with features that you’ll benefit most from.
APR (Annual Percentage Rate)
If you normally carry a balance on your credit card, it’s probably best to choose a card that has a low interest rate.
You won’t get to choose your exact APR since the card company determines that once you’re approved for the card. But you can see what the APR range is, and how it compares to the other cards you’re thinking of getting.
(The APR isn’t as important if you always pay your monthly balance in full and on time.)
Credit cards aren’t just a great way to get rewards. They often give you additional perks.
Common travel perks can include travel insurance, trip cancellation insurance, roadside assistance and car rental insurance. Some credit cards also offer extended warranties on products you buy, beyond the manufacturer’s warranty.
Many credit cards offer you a sign-up bonus. Some credit cards also offer higher rewards for the first few months after you sign up.
However, make sure you read the fine print. Many times, you’ll have to spend a certain amount within a specific timeframe to qualify.
Choose a credit card with rewards that you’ll not only take advantage of, but are easy to redeem.
There are many different types of reward programs to choose from, including cash back, reward points and travel rewards.
Some reward programs are simple, and others are more complicated, but can easily earn you more rewards. Consider this tradeoff when shopping for a rewards card.
This is important to consider, especially if you’re a big spender or you and your partner plan to share the same credit card. You’ll want a credit limit that’s high enough to meet your spending needs.
You don’t get to choose the exact credit limit you’ll get as this is something the issuer decides based on their evaluation of your application.
But you can look at the minimum and maximum credit limit offered for a card to get an idea of what credit limit you might get if you’re approved.
Some credit cards charge you an annual fee to keep your account open (usually in exchange for more valuable rewards).
Make sure the rewards are worth it for the annual fee you’ll get hit with, otherwise you could be better off with a no-annual fee card.
Foreign Transaction Fees
If you travel a lot for business or pleasure, think about getting a card that has no foreign transaction fees.
This will help save money when shopping outside the country that you live in, or any purchase you make in a foreign currency.
Pay attention to any other fees you might get hit with.
Before you apply for a card, knowing which fees a card has, and how much those fees are can help you avoid surprises.
Here are some of the most common fees to be on the lookout for.
- Late fees:
If you’re late paying your credit card bill, you may be charged a fee and/or pay a higher interest rate.
- Over limit fee:
You may have to pay this fee if you exceed your credit limit.
- Balance transfer fee:
If you transfer a balance from another credit card, you may have to pay a fee.
- Cash advance fee:
You’ll be charged this fee if you take a cash advance from your credit card.
- Inactive fee:
A fee you may incur if your credit card is inactive for a certain number of months.
4. Figure Out Which Card You’ll Likely Get Approved For
To improve your chances of being approved for a credit card, you’ll want to know what types of credit cards you should apply for based on your credit profile.
Each credit card is designed for a specific credit score range, so you want to apply for cards that you are likely to get approved for.
One way to do this is to look at the featured credit cards on Credit Karma’s credit card page.
If you’re a member and logged into your account, the “Top Picks” section presents you with recommended offers based on your credit score from TransUnion, helping you find cards that you may be more likely to be approved for.
You can even use the Credit Karma app on your phone to check your credit score (I check in with it every month).
5. Apply for the Credit Card
Once you’ve decided on the right card for you, it’s time to actually apply.
You can usually apply for a card online, and many times you’ll know within seconds if you’ve been approved.
Before you apply for that credit card, be sure to read the credit card application disclosure agreement to make sure you know exactly what you’re signing up for.
Once you start the application, you’ll be asked for basic information.
This typically includes your:
- Phone number
- Employment status (including income)
- Housing status (homeowner, renter, living with parents, etc.)
- Monthly housing payment amount
- Number of years at current address
You’ll need to have your Social Insurance number handy, as you’ll probably be asked for it (although it is optional in many cases).
6. Use the Card Responsibly
A credit card can be a powerful tool when used responsibly.
Here are several tips on how to use your card responsibly:
- Pay your balance on time and in full every single month.
One way to do this is to set calendar reminders on your smart phone.
- Never think of your card balance as “extra money”.
You should treat it similar to your debit card or cash.
- Don’t chase after rewards by making purchases you normally wouldn’t.
Ask yourself before every purchase if this is something you would buy anyway if there were no rewards involved.