Applying for a credit card isn't a huge mystery. While some people are intimidated by the application process, modern technology has made applying for a credit card more straightforward. You can apply from your computer, and you don't need to go to the bank, leave your home, or drop something in the mail to apply. How's that for progress?
The big challenge for most consumers isn't the credit card application process. Instead, it is choosing the right credit card for their financial needs and goals. That doesn't mean there aren't a few things you should know before applying for a credit card. Understanding these things can help you choose the right card and get a better result for your efforts when applying for credit cards.
Required Information and Documentation
Understanding your credit score before applying for a credit card is prudent. Credit card companies rely on this score to evaluate their lending risk to you and decide the credit limit they're prepared to offer. The good news is that you're entitled to a free credit report annually from each of the three major credit bureaus—Experian, Equifax, and TransUnion. This report offers a detailed credit history but does not typically include your credit score. If you haven't reviewed your credit report recently, now is an ideal time to do so.
For your credit score, some banks, credit card issuers, and online services offer free access, often as part of their customer services. Additionally, consider subscribing to credit monitoring services. These services provide regular updates about significant changes to your credit report, including new inquiries, new credit accounts, delinquency reports, and other essential information concerning your credit health. Just be aware that these updates' frequency and associated fees can vary by service.
Other than knowing your credit score, you will need to provide the credit card company with a few necessary details about yourself, including much of the following information:
- Annual income
- Social Security number
- Name
- Address
- Housing costs
In addition to how much debt you have (which will show up in your credit report), creditors want to know how much they feel you can afford to take on. In other words, they don't want to extend more credit than you could reasonably repay. This information, along with your credit report, helps them determine that.
The Credit Card Approval Process and Timeline
Some credit card approvals are instant. That is often the case with companies that have extended "pre-approved" offers. Others may take a little longer as credit card companies verify specific details of your credit report or confirm the personal and financial information you provide. Unfortunately, there isn't a one-size-fits-all credit card timeline for the approval process. Nor is there a set method for approval. Some credit card companies will offer email notifications within seconds of the application. In contrast, others may take a few days or weeks and notify you of the results via traditional mail. If credit card companies decline your application, they are legally required to provide the reason for their decision.
Understanding Your Credit Limit, Interest Rates, and Fees
After approval for a new credit card, the card issuer will notify you of crucial details, including your credit limit, interest rates, and fees you're responsible for paying. These fees may include annual fees, balance transfer fees, late payment fees, foreign transaction fees, over-the-limit fees, and cash advance fees.
Understanding these fees is critical for helping you avoid penalties for late payments, prevent you from accidentally exceeding your spending limit, and more. The goal is to know what is in store with your credit card and its associated fees so that you do not find yourself paying preventable fees as unintended consequences.
Managing Your Account
Most modern credit card companies allow you to manage your account online. Many credit card companies offer mobile phone apps for easier access to critical account information and payment options. Credit card companies aim to manage your account and keep it on track as efficiently as possible. You want to make sure you pay as much of your account balance as possible ahead of the "payment due" date on your statement. Additionally, pay as much above the minimum monthly payment to reduce the total interest you pay for your purchases.