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How to Apply for a Credit Card

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Applying for a credit card, using it responsibly and paying bills on time every month can help you achieve your credit goals. Are you wondering how to apply for a credit card? Depending on your existing credit, payment history and income, applying can either be a breeze or a bit of a challenge.

Yellow notepad with pen svg icon Lesson Notes:
  • Credit cards can help you build or establish credit, earn rewards or help you consolidate and pay down existing debt.
  • Before applying, research what requirements the credit card companies have, to increase your chances of getting approved.
  • Be aware of the fine print, considering introductory offers and fees that you may incur.

Why Apply for a Credit Card?

There are many reasons why you may wish to apply for a credit card. Make sure you’re applying for a credit card for a good reason and that you aren’t overextending yourself long-term.

Building Credit

If you have minimal credit, having a credit card can help you build a more robust credit profile. By working to improve your credit, you’re building towards the day when you may want to get an auto loan or finance a home purchase. By getting a credit card, using it responsibly, staying well under your limit and paying regularly and on time, you can increase your credit score and build a solid payment history. When you make an on-time monthly payment on your credit card or pay off your balance, this shows as a positive on your credit report and helps you build credit.

Making a Big Purchase

If you need to make a large purchase, such as furniture, or a wedding dress, a credit card allows you to buy now and pay your purchase off over time. Just remember that the longer you take to pay off your purchase, the more interest you’ll pay on your line of credit.

Earn Rewards

Many credit cards let you earn rewards points that can be redeemed for cash or items, applied to your statement balance or converted into airline miles. You should make sure you’re not spending more by using a credit card than you are earning. In some cases, an annual fee or high interest charges can outweigh the benefits of earning rewards.

Transfer a Balance

If you already have a credit card and it has a high interest rate, you might want to open a new one to take advantage of a no-interest rate grace period. In many cases, you can simply transfer the balance (effectively paying off the old card with the new one) and get anywhere from six to 18 months of no interest. This means you can concentrate on paying down the balance and save a lot of money. Before signing up for a balance transfer, determine if the card you’re applying for has a balance transfer fee and if paying the fee to save on interest is the best option for you.

Preparing to Apply for a Credit Card

There are a few things you should do before you apply for a credit card to increase your chances of being approved.

Research Credit Cards

Spend some time researching different cards to learn more about what options are available. Different credit cards have different qualification requirements.  Most lenders will look at your credit score, including your ability to pay your bills on time, proof of income and/or debt-to-income ratio when evaluating your application.

Check Your Credit Score

Your credit score may be a major factor in whether a lender is willing to extend you a line of credit. When applying for a credit card a hard inquiry is made on your credit, which can negatively impact your credit score. If you know your credit score, you can apply for cards that better fit your needs. If you have a lower credit score, credit builder or secured credit cards might be a better option.

Choose Your Card Type

What kind of credit card do you want? That depends on your goals for credit use and your spending habits.

Best Card to Build Credit

If you’re trying to rebuild or establish credit, a secured credit card might be your best option.  You can deposit a sum of money with the card issuer that will secure your line of credit. Your credit limit will generally be equal to the amount you’ve used to secure it.

This credit card can slowly improve your credit as you use part of the available credit, make payments on time and use it again. A good rule of thumb is to use the card for purchases you would normally make anyway (like gas or groceries) and then use the cash you would have normally made those purchases with to pay off the balance.  This will help show you are using credit responsibly.

To keep your score high, avoid using more than 30% of your available credit. Pay off your remaining balance every month to keep your balance as close to zero as possible.

Best Card if You Travel

If you travel a lot, you may want to look for a card with a rewards program you can use to earn airline miles. Also, look for perks like savings on travel, travel insurance or even airline lounge access or TSA PreCheck. You can also benefit from cards that have low or waived foreign transaction fees so you don’t get hit with extra costs when using your card abroad.

Again, this card is best used when you already have the cash to pay off the balance, so you don’t incur interest charges that could wipe out the benefit of earning miles. Track your interest charges and the value of your rewards to make sure you are really coming out ahead.

Best Card if You Have Debt

If you already have a credit card and it’s maxed out at a high interest rate, finding a balance transfer credit card with a 0% annual percentage rate (APR) on balance transfers for up to 18 months can help. You can make monthly payments and every cent will go towards paying down your balance instead of keeping up with interest. Be aware that some credit cards have a fee to transfer balances.

You can make the most of this type of card only if you pay off your balance before the card reverts to a normal interest rate.

How to Apply for a Credit Card

You’ve done your research and preparation: now it’s time to apply for a credit card. Follow these steps to maximize your chances of approval.

Prequalify

Many card issuers can do a prequalifying check and tell you whether or not you’re likely to qualify based on a “soft” credit inquiry. You still need to submit the required paperwork, but this doesn’t impact your credit score. You can also pre-qualify for several cards at once until you find the right option for you. If the prequalification comes through as a “yes,” you can fill out the complete credit card application and allow the hard credit check.

Apply Online

Most credit card applications can be filled out online and digitally signed. You’ll need to be ready to input your full name, phone number, address and whether you own a home or rent. You’ll also have to state your annual income and give them your Social Security number to do the credit check.

Usually, you’ll get a credit decision in just seconds. If you’re declined, the lender will send you a letter letting you know why. Multiple credit checks can impact your credit score.

Once You’re Approved

Make sure you read all the fine print on your credit card agreement before beginning to use your card. Things to check for include:

0% APR

A 0% APR means you can carry a balance without interest being charged for a specific period of time. However, if you don’t pay off the balance by the end of the promotional rate period, some cards will add the interest that would’ve accrued to the balance, which must then be paid off. If you get this kind of card, pay off any balance before the introductory period expires.

Balance Transfers

If you get a balance transfer credit card, make sure to check the terms so you know if your credit limit is high enough to take the balance you intend to transfer. Also, look for a balance transfer fee—if one is charged, will it be more than you save in interest by making the transfer?

Sign-Up Bonuses

Credit card issuers may offer a sign-up bonus, but this usually comes with requirements. If you get the card and stick it in a drawer, you could miss out on cashback or bonuses that hinge on a minimum amount spent in the first 30, 60 or 90 days. It is recommended to spend and immediately pay off your balance to meet the requirements and get your bonus without having to pay interest.

Wisely choosing and applying for credit, then using that credit responsibly is the best way to safeguard your financial future. Use these tips to keep your credit score high and your debt threshold low.

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