Published On: Wed, Jun 7th, 2017

Things Everyone Needs to Know Before Applying for a Credit Card

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Today, credit cards remain popular and widespread as they are highly convenient for making payments and getting access to finance in a jam. But what are the basic fundamentals involved before acquiring a credit card? Are you familiar with what banks consider when evaluating credit card customers? If you intend to acquire a credit card, there are some fundamental aspects to consider.

1. Your Level of Income

In all credit card application forms, there is a section where the lender seeks out information about your city, age and monthly family income. It also asks for your employment details. All this information is necessary for the lender to make a rational decision as to whether you qualify for a credit card or not. Your income is the main thing that determines how qualified you are to make repayments every month.

2. How You Intend to Use Your Card

You must first decide why you want to use your credit card. There are many benefits that accrue from using the card. You can use it for its outstanding offers, as an alternative to paper money, or for online shopping. You can apply for a credit card and use it for emergencies too. When choosing a credit card, go for one that offers low interest rates rather than that which comes with impressive offers. For those who value the reward more, do some research on which cards offer the best rewards. A good example would be a motor vehicle owner opting for a card that offers cashback on fuel refills, or a frequent traveler opting for a card that provides airmiles. So, make sure to look into this when selecting your credit card.

3. Interest Rates Charged on the Card

First, check out what interest rates are charged on the card. If you are capable of paying your credit dues within the demarcated timeframe, then you should not worry much. There are those who might find it easier to pay the minimum amount payable that is required of the credit card monthly and then defer the balance forward. Nevertheless, this method is not recommended.

4. Penalties and Fees Charged

You must understand what your annual fees on the card are, particularly if you got the credit card for free. If you are not knowledgeable in financial matters, ask someone who can offer guidance. Ensure that the annual fees charged on the card do not start after your first or second year. Failure to check this out might affect your credit score and affect your pockets as a combination of interest rates and late payments can be disenfranchising. Have the exact figure of your financials to ensure you are fully aware of your financial obligations and plan accordingly.

5. Credit Limit on Card

If you intend to use your credit card for everyday purchases, you will require a higher credit limit. On the other hand, if you are a casual user who would like to use the card occasionally, this is an important consideration. Your credit limit is determined by your credit score, level of income, and any other provisions required by your card provider.

6. The Reward Offered

A good number of millennials are attracted to credit cards for the offers and discounts they offer. There are no blanket offers so ensure that the card you opt for has the offers that will benefit you the most. Take the time to read the fine print while relating it to your preferences and tastes. If you seek a credit card just to get a big discount or one-time offer, reconsider your priorities. Look for the advertiser traps on the zero schemes before you opt for a new card. With some cards, you can get special rates on hotels, shopping stores, hotels, and fuel companies among others. Some credit cards offer a wide variety of offers for premium members and can save you a great deal of money.

7. Quick Debt Repayment

The decision to acquire a credit card should go hand in hand with personal discipline surrounding making your credit card payments. You must go out of your way to ensure that you do not default on your monthly payments. In as much as you can settle a default at your bank, this will leave a trail of bad records on your credit score at the Credit Information Bureau. A negative credit score can hamper your chances of acquiring a loan on a house or a motor vehicle. This can be very devastating to you in the future, so keep vigil with your financial obligations once you get a credit card.

8. Past Credit History Track Record

Your credit history details both past and present matter a great deal when applying for a credit card. Those who take education, home or personal loans will undergo thorough scrutiny, the lender will definitely go through your CIB report and ascertain your credit history accordingly. If you cleared all your loans and credit balances on time without leaving any outstanding balances, there’s a high chance that your application will be approved. It’s always a good idea to first check out your credit score so that you can make the necessary adjustments and remove a repossession from your credit report if you have to.

9. Your Present Relationship with the Lender

For those with savings or salary accounts with banks, it’s much easier to acquire a credit card. If your accounts are well in order (few overdrafts), and you have maintained a reasonable minimum balance over time, you are good to go. It’s also great if your account receives a consistent money flow as it becomes easier to monitor and verify your income-related details.

Conclusion

Always remember that credit cards are not free or a tool that you can flaunt around to show status or prestige. They are tools which banks offer to subscribers to use when they do not have cash. Do not forget that this tool can be a major income earner for banks if you are unable to pay your financial obligations on time. Try not to default or ignore the points which have been outlined above.