If you’ve finally found a credit card you think is a great fit, don’t press submit on the application just yet. Consider a few things before you finalize the application. After all, you’re initiating a new financial relationship that can have a major impact on your life. You want to do it right.
Your spending habits play a role in the card you choose.
If you might carry a credit card balance, pick a credit card with a low interest rate. If you’re a big spender, look for a card that pays higher rewards, especially in the categories where you spend the most. Interest rates may not matter as much if you’re paying in full each month, so look for a credit card that offers great perks. Or, avoid choosing a credit card with an annual fee if you’re not going to use your credit card very often.
You won’t get a warning when your promotional rate is expiring.
If you’ve chosen to take advantage of a zero percent interest rate on either purchases or balance transfers (or both), mark your calendar for the expiration date. You may not get a warning before the regular APR kicks in. If you’re hoping to pay off a balance before the end of the promotional period, calculate the monthly payment amount beforehand. That way, you can consistently pay your balance over time rather than rushing to take care of the balance in the final days of the promo rate.
Credit card terms can change in the future.
Your credit card issuer reserves the right to change certain features about your credit card. In most cases, have to let you know in writing first and give you a chance to reject the new terms. The exception is when you have a variable APR, which can change based with the market, without advanced warning. Make sure you read all correspondence from your credit card issuer to keep up with changes to your account.
Each new inquiry can affect your credit score.
When you apply for a credit card, the credit card issuer has to pull your credit to make sure you qualify. A record of that credit pull goes on your credit report and is factored into your credit score as a credit inquiry. Each new inquiry can cost you a few credit score points and make it harder to get approved in the future. Fortunately, only inquiries made in the past 12 months go into your credit score.
You may need to wait before applying for another credit card.
Opening too many credit cards in a short period of time can damage your credit, but that’s not the only reason to wait. If you’re chasing credit card rewards and signup bonuses, pay attention to the fine print. Some credit card issuers only allow you to earn one signup bonus every 24 months within their family of credit cards. Others also consider the total number of credit cards you’ve opened in the past two years. Be strategic about chasing rewards and pay attention to which card issuers have the more restrictions.