10 Questions to Ask Before Accepting a Credit Card Offer
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Unsolicited credit card offers can flood your mailbox and email inbox, and in most cases, you may not give these offers a second glance. But once you're ready to add a new credit card to your financial portfolio, it's important to understand the basic features of these offers and choose the right card. Credit cards are not one and the same, so it's important to ask yourself these 10 questions before accepting an offer. (See also: How to Understand Pre-Approved and Pre-Qualified Credit Card Offers)
1. Is This the Right Time to Apply for a Card?
You may not know this, but there are right and wrong times to apply for a credit card. Typically, you don't want to apply for new credit if you're in the process of or thinking about financing a home. Anytime you get a loan, lenders take your current debt load into consideration. If you get a new credit card and amass a large balance fairly quickly, this can increase your debt ratio and reduce purchasing power. There's nothing wrong with getting a new card, just make sure that the decision to accept an offer doesn't interfere with your ability to get financing in the near future.
2. Am I the Right Candidate?
There are credit cards for every type of borrower. Before accepting a credit card offer, read the fine print and know the qualifications for the card, or else you'll waste time applying for cards you're not eligible to receive. Some credit cards are designed specifically for people with excellent credit, whereas other cards are suited for people with low credit scores. (See also: Best Credit Cards for People with Fair or Average Credit)
Credit card companies typically prescreen and match recipients with the appropriate credit card offer. So if you receive an offer in the mail, you're more than likely a suitable candidate. But if you're researching offers on your own, be aware of basic qualifications.
3. What's the APR?
If you'll carry a balance from month to month, make sure you know the card's annual percentage rate (APR). This rate lets you know how much you'll pay in interest if you don't pay off the card in full every month. Interest rates vary and depend on your credit score. Ideally, you want the lowest rate so that you pay the least amount in finance fees.
See also: Best Cards With the Lowest APRs
Credit card applications feature the APR prominently. A credit card may offer interest rates ranging from 10.99% APR to 21.99% APR, in which case borrowers with the lowest scores pay the highest rates. Some cards also have low introductory rates, such as 0% interest on balance transfers and standard purchases for a certain number of months. The interest rate on a credit card can also be fixed or variable. A fixed rate remains the same, but a variable rate can move up or down based on the market.
4. Is There an Annual Fee?
Some credit cards charge an annual fee which can range from $50 to $450. The fee often depends on the number and level of cardmember perks. Make sure you read the fine print for information on annual fees. Not every credit card has an annual fee. If you're looking for a basic, no-frills credit card and you don't care about cardmember perks, it is possible to find credit cards with no annual fees.
5. Is There a Rewards Program?
Many credit cards offer rewards, such as miles, points, or cashback for every dollar you spend. A rewards credit card can work if you use credit cards frequently. But it's important to find a credit card with rewards that fit your lifestyle. If you're a frequent traveler, you can search specifically for airline credit cards or a credit card that lets you earn miles or points redeemable for travel. The point of the rewards is to get something back for spending (as an incentive for spending, too), so you might as well get something you want or need.
6. Does the Bank Report to the Bureaus?
Not every credit card company reports to the three major credit bureaus on a regular basis. Whether you want to build or improve your credit score, choose a credit card company that will report your activity to the bureaus on a monthly basis. You can find credit bureau reporting information in the terms of agreement on the application, or you can call the bank for this information.
7. Do I Need Another Credit Card?
Getting a credit card offer in the mail doesn't mean you have to complete the offer. Consider whether you need another credit card. Will the new credit card offer you additional perks and benefits, or save you money by offering cash back? Is there a card with an enticing sign up offer? Then again, if you can't keep up with your current monthly payments, or if your current credit cards are maxed out, adding a new card may further complicate your finances.
8. What Are the Credit Card Fees?
The cost of owning a credit card doesn't stop with the annual fee and APR. Credit cards include a variety of other fees, and it's important to count the cost before accepting an offer. You need to consider the late fee, the cash advance fee, and the balance transfer fee. Additionally, if you used the credit card in a foreign country, would you be charged a foreign transaction fee? Credit card fees add up quickly. You can save money by picking a card with the least amount of fees.
9. What Else Can the Card Offer Me?
Besides reward programs, credit cards include a host of other offers and incentives to lure customers. For example, some credit cards give cardholders free access to their credit scores and the ability to download an app and manage their account from a mobile device. Other cards include car rental insurance, trip cancellation insurance, extended warranty protection, price protection, and many other perks.
10. How Does the Offer Compare to Other Offers?
It isn't enough to review the specifics of a particular credit card offer, you should also determine how this offer compares with other offers. The truth is, you can't truly identify a good credit card offer until you make comparisons. After receiving an offer, the fees and interest rate may seem fair and reasonable. But shopping around may open your eyes to something better. This doesn't mean you have to spend weeks comparing different credit cards, but you should compare at least three cards before making a decision.
What do you consider before accepting a credit card offer?
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