A credit card is like a razor-sharp knife: it can either be an invaluable tool or a dangerous weapon. You’ll want to take your time picking the one that meets your specific needs and then wielding it very, very carefully.
But do that, and the rewards can be tremendous!
Having the right card can lead to peace of mind, tons of cash back, and best of all – you’ll build credit (when you use your card the right way!)
Understand your credit score
The very first step in how to apply for a credit card is to understand your credit score, since that number will dictate which cards you should get (or whether you should get one at all).
What is a credit score?
A credit score is a three-digit number between 300 and 850 that represents your “grade” as a potential borrower of money.
It’s calculated by the big credit bureaus who look at your history of borrowing money and paying it back, as reported by your lenders. The FICO score is the most popular type of credit score, which is why you’ll often see the two terms used interchangeably.
Anyhow, things like making on-time payments, paying bills, and not applying for too many loans at once will all help to build your credit score.
Conversely, missing payments and applying for too many loans too often can hurt your credit.
You can read all about credit scores in our feature How Credit Works: Understanding The Credit History Reporting System.
For now, all you need to know is this: your credit score will dictate which card you can (and should) apply for.
What is the minimum credit score needed to be approved for a credit card?
FICO scores are ranked thusly:
- Poor: 300 to 579.
- Fair: 580 to 669.
- Good: 670 to 739.
- Very Good: 740 to 799.
- Exceptional: 800 to 850.
The most basic, no-frills credit cards require fair credit, while the top-of-the-line rewards cards named after rare earth minerals all require very good credit.
Read more: What Credit Score Do You Need To Get Approved For A Credit Card?
Learn how to use a credit card responsibly
Not to sound like your dad, but learning to use a credit card responsibility is something you want to learn before you get the card – not after.
Again, a credit card is like a very sharp knife – useful and valuable – or dangerous.
It can be surprisingly easy to slash your own credit using a credit card – and the card companies don’t really warn you when you’re about to do it. To illustrate, here are the two “features” of your credit card that sound innocuous, but actually have disastrous consequences if you misinterpret them:
|What your credit card statement says||What it sounds like||What is really means|
|Your credit limit is $5,000||You can put up to $5,000 worth of spending on your card without penalty.||You can put up to $5,000 worth of spending on your card without penalty from your credit card company.
Your credit score, however, will take a hit.
Maxing out one of your lines of credit is bad for credit. To protect and improve your credit score, keep your card spending to below 40% of your credit limit.
|Your minimum payment due this month is $35||As long as you can make the minimum payments each month, you can keep using your card and just pay the rest off later.||If you owe $1,000 on a card with ~29.99% variable APR and you only make minimum payments, you’ll pay about $710 in interest and it’ll take you 49 months to pay off your balance in full.
Plus, carrying over debt next month means you’re approaching your credit limit, which as we’ve established will hurt your credit score.
Needless to say, a credit card is not something you should just rack up each month. That’s what the big card companies want you to do so they can charge you gobs of interest!
How should I be using my credit card?
Responsible credit card usage is pretty simple and straightforward:
- Your net purchases should never exceed 50% of your credit limit.
- Pay it off each month (or, better yet, set up Autopay).
- Be mindful of your rewards and maximize them.
- Take advantage of your 0% APR period, if you need it.
When you’re starting out with your first credit card, it’s best to think of it like your debit card – like the money is getting instantly withdrawn from your bank account.
Read more: How To Use A Credit Card Responsibly
Choose the right card for your needs
Most credit cards generally fall into one of six buckets. It’s a lot, I know, but you’ll want to consider all six to get the one that’s the best fit.
The six are:
- Secured credit cards.
- 0% intro APR credit cards.
- Student credit cards.
- Travel rewards credit cards.
- Premium (paid) rewards credit cards.
- Regular rewards credit cards.
Here’s a breakdown of each, and which might be the right fit for you:
For poor credit → secured credit cards
As hinted above, if you have a credit score below 600, you may not qualify for any of the other cards on this list. Not the end of the world! You may just have to spend some time building credit with a secured credit card.
Secured credit cards require you to put down a cash security deposit, which the credit card company can pull from if you miss a payment. When you’ve built your credit enough, your credit card company may then help you seamlessly upgrade to one of their regular rewards cards (and refund your deposit).
To help you decide, check out When To Consider A Secured Credit Card – and if it’s a fit, visit our list of the Best Secured Credit Cards.
For carrying a balance → 0% intro APR cards
If you have good or excellent credit (670+) and think you may need to carry a balance month-to-month, consider a card offering 0% intro APR.
You’ll often see this advertised as “0% intro APR for 18 months” or thereabouts. And thankfully, it’s exactly what it sounds like – as long as you pay your total balance on the card off within 18 months, you won’t be charged a dime of interest.
And since 0% intro APR cards are so popular these days, some even offer 1.5% unlimited cash rewards!
If you do get a zero-interest card, just remember not to max it out since that can negatively impact your credit score!
Check out our list of the Best 0% APR Credit Cards.
For students → student cards
If you’re still in school, you may have both limited income and limited credit history. Not to fret – there are actually credit cards designed specifically for your needs that can help you build your credit while even earning a trickle of rewards.
Check out our list of the Best Credit Cards For College Students.
For frequent travelers → travel rewards cards
If you’re always on the move and spend big on flights, rental cars, and hotels, you’ll get the most benefit from a travel rewards card. They also contain a bevy of benefits that make traveling easier. Complimentary trip insurance, lounge access, and a 24/7 concierge you can call up for booking help are all common perks for travel rewards cardmember.
Word of caution – many travel rewards cards have annual fees, and only really pay for themselves if you travel a lot.
But if that’s you, check out our list of the Best Travel Rewards Credit Cards.
For big earners, big spenders → premium (annual fee) rewards cards
If you earn and spend a lot, and you have very good or excellent credit (740+), an annual fee, premium rewards card might actually make sense for you.
These cards tend to charge an annual fee of $95 to $695, but they come jam-packed with industry-leading perks, benefits, and up to 10% cash rewards on qualifying purchases.
Annual fee cards can be dangerous in the hands of the inexperienced, however, as they tend to suck people into spending habits they can’t actually afford. They’re probably not a fit as your first credit card, but I wanted to at least make you aware of them.
To educate yourself on the perks (and pitfalls) of annual fee cards, check out my other piece Are Amex Cards Worth It?
For everyone else → regular rewards cards
For the majority of first-time cardholders, a good ol’ vanilla rewards card will do just fine.
These days, your average rewards card will have the following features:
- Credit required: 670+.
- Cash rewards: 1.5% – 5% cash rewards on eligible purchases.
- Intro sign-up bonus: $150 – $250.
But like a good froyo, rewards cards can come with all kinds of toppings and flavors. Some offer 0% APR in addition to rewards, others a bit more travel rewards, and some even offer 2% unlimited cash back on everything.
Prepare to apply
Applying for a credit card is a pretty straightforward process (card companies don’t want to bog down new clients, after all) – but there’s still a little prep work you can do to expedite your application process.
What do you need for a credit card application?
- A social security number. For most credit card companies, only U.S. citizens with social security numbers can apply for a credit card.
- A source of income. Banks want to know that you’re making enough money to pay your credit card bill each month. They typically don’t request proof via pay stubs or W-2s, but still – don’t fib on this or any other financial application – you’ll surely regret it!
- Good credit. Finally, your card issuer will want to take a good long look at your credit score. Since credit cards are a type of unsecured loan with no collateral attached, banks want to know that they can trust you as a borrower.
Don’t forget about pre-approval
Preapproval is an optional step to see which cards you might get fully approved for without making a hard pull of your credit.
During preapproval, a credit card company will typically request your:
- Social security number.
- Monthly rent/mortgage.
- Credit score estimate.
Then, if everything looks good, they’ll tell you which of their cards you’re likely to get approved for.
Why should you get pre-approved?
Preapproval can save you the hassle and disappointment of getting rejected for a card – not the mention the ding to your credit. It’s a good idea if you’re right on the cusp of a card’s credit requirement, i.e. 667 and they require 670+.
Read more: How To Get Pre-Approved For A Credit Card Before You Apply
Here’s what your typically online credit card application will request:
- Personal info. I typically never give my real phone number online, but this is the rare exception since they’ll use all this info to verify your identity.
- Income. Again, your bank will want to know your income and biggest monthly expense (rent) so they can gauge your ability to pay off your card each month. They may also ask how long you’ve been at your current residence, again, to verify your identity.
- Signature. A credit card application is a binding, legal contract, so the bank will need your John Hancock for their records.
- Authorized users. If you’d like an extra card for your child, spouse, or another person to use, put their name here. Keep in mind that authorized users aren’t cosigners; you and you alone are responsible for the total monthly payment.
- Balances to transfer. Finally, if you’re looking to initiate a balance transfer from your old card onto your new card, here’s where you’d put the relevant info. To learn more about balance transfers and whether it’s a good idea, check out How Do Credit Card Balance Transfers Work.
That’s it! As far as financial documents go, pretty short and simple. Most of the due diligence is done on the back end by the card issuer.
Oh, and as you apply for cards, you’ll want to keep an eye on your credit score. Credit monitoring is good practice in general, since you’ll want to address surprise drops before applying for another card.
Credit cards, like knives, can be dangerous if wielded willy-nilly. But get the one that fits your needs and handle it with care, and you’ll make magic happen.
The perfect credit card doesn’t just offer cash back – it builds your credit and ferries you to financial prosperity. So take your time, follow the steps, and apply for the card that’s right for you.