There's nothing particularly difficult about applying for a credit card. Yet it's a major financial commitment, and the moves you make during the application process can have long-lasting financial repercussions.
These five steps will help you stay on the right track.
1. Make sure your credit intentions are good
Before you even begin to fill out the credit application, ask yourself why you want a credit card, says Sandy Shore, spokeswoman for Novadebt, a New Jersey credit counseling organization.
“There are good reasons and bad reasons to get a credit card,” says Shore. “If you want a card to build credit, that's a great reason. If you just want another credit card, well, that's OK. But if you are applying for a credit card because you need it, think twice before applying.”
Credit cards should never be used as a stopgap measure if you're short of funds, Shore says. While they may appear to offer a solution, using credit to fill in financial gaps will only magnify and accelerate financial problems in the long term.
2. Familiarize yourself with the options
Once you have established why you want a credit card, the selection process becomes easier. If you will be carrying a balance on the card (to finance a big purchase, for example), look for a low-interest credit card. If you're looking to earn rewards (and you always pay your balances in full and on time), read up on the best rewards credit cards available.
If you don't have a long and well-managed credit history or have bad credit, be sure to select a credit card targeted at those with bad, fair or limited credit. Otherwise, your application is unlikely to be approved.
3. Read up on the terms
Think you've found your dream card? Card issuers highlight perks and bonuses, but you have to dive into the terms and conditions to make sure you understand what you're really getting.
If there is an annual fee (the fee is often waived first year, so it's easy to forget about it), ask yourself if you'll earn it back in rewards. If you're looking for a 0 percent balance transfer card, check to see what the go-to rate will be once the 0 percent period expires, and when it will kick in. Make sure that you can pay off the balance by then to avoid paying high interest rates on what's left. Also, while you may find a 0 percent balance transfer card, most charge a fee of up to 3 percent for the actual transfer. So, if you want to move $1,000 from a high-interest card to a 0 percent balance transfer card, it may cost you $30 to do so, which will be added to the balance.
Also look for hidden fees or tricky terms. For example, some store credit cards offering 0 percent on purchases will charge interest retroactively from day one if the balance is not paid off in full at the end of the promotional period. Checking the terms and conditions carefully is the only way to avoid nasty surprises like that down the road.
4. Fill out the application — and be honest
When you fill out a credit card application, you will be asked to provide information about your current income, age and employment. You'll also likely be asked if you own or rent your home and be asked to provide your Social Security number so that the bank can pull your credit report.
Credit card issuers use this information to determine whether you meet their criteria for credit card approval, and how high a credit line to give you. If the issuer doesn't think your income will be enough to pay the bills, you might be required to get a co-signer for the card — someone who enters a legal contract to pay the balance if you fail to.
When filling out this information, it can be tempting to inflate your income or bend the truth in other ways to increase your chances of acceptance. Don't.
“Don't lie about your age, employment or income,” Shore says. “You might get a higher limit than you can handle. On any kind of application you want to be truthful. If you have to lie to get a credit card, you have to wonder if this is the right thing for you.”
If you run into credit problems down the road, card issuers will check up on the information you provided on the application, and you could get accused of fraud if you inflated your income or lied about other things, says Shore.
She tells the story of a young man who sought credit counseling at Novadebt for card debt he could not pay off. He had lied about his age on his credit card application (he was under 18 when applying), and the card issuer threatened him with criminal action if he didn't pay off the debt.
5. Be patient
Once you submit your application, it could take up to four to six weeks before you hear back from the issuer and get your credit card. During this time, the issuer will process your application, which means pulling a copy of your credit report and your credit score to see if you meet its criteria for approval. If you're applying for a student credit card, you may be asked to provide additional documentation to prove you are actually enrolled at a college or university.
Even if you have excellent credit and apply for an instant-approval credit card, it may take a few weeks before you actually get the card in the mail, so be patient.
For people with good or excellent credit, it's fairly easy to get approved for a new credit card. If you don't have much of a credit record or have bad credit, it's more difficult. If your application is rejected, consider applying for a secured credit card to get started on building credit.
Using a secured credit card for a year (and paying the balance off on time and in full each month) will help you improve your credit score enough to try again — and get approved for a regular, unsecured bank credit card.