Saturday, 8 June 2019

5 Things To Know Before You Apply For a New Credit Card

5 Things To Know Before You Apply For a New Credit Card

I got my 5th credit card in the mail so I'm really excited that I was approved for that card because of 2 really big reasons. My utilization is pretty much always going to be under 10% now because of my total credit available increase to about $40,000

Read: Simple Step To Improve Your Credit Score Fast

Because of that it makes it really easy for me to maintain a really good credit score over time without having to do much, I'm really excited about that and I just wanted to share this article in honor of my fifth card, 5 things to consider when you're applying for a new credit card.

Let Get Started

1. Does The Card Have An Annual Fee?

If you're new to credit cards or just starting to build credit then I especially encourage you to stay away from credit cards that charge an annual fee. There are hundreds if not thousands of different credit cards available to you that won't charge you an annual fee

Read: Top Credit Cards for Beginners To Apply For
Why should you pay for a service when you can get it for free.

2. What Is The APR or Interest Rate?

The average interest rate in the US right now 15 to 20%, so for those of you who have good to excellent credit, you should be really excited because you qualify to get a pretty good interest rate, somewhere between 15 and 20%

Read Credit Card APR - How Do They Work

But if you have fair or poor credit then you're probably going to be more in the 20 to 25% interest rate range.

3. What Are The Penalty Fees And Rates This Credit Card Has?

For example, If you make a late payment you are going to charge a late payment fee and your interest rate is going to be bumped up to a penalty interest rate

Read: How Your Credit Cards Work - Important Things You Need To Know

You have to know what is the penalty interest rate and the late fee. You really have to understand what those fees are so that you're clear about what kind of contract you're entering into

4. How Long Is The Grace Period

Traditionally a grace period is about 25 days and that is how much time you have from the day that you get your bill to the day that it's due where you can make payments on your credit card interest fee

But a lot of credit cards have cut down the grace period to around 20 days which decreases the amount of time that you have to make interest repayments and increases the chances of you making a late payment

Which only means you are going to get smacked with a late payment fee. 

5. What Type Of Billing Cycle Does This Credit Card Use?

Most credit card issuers use single-cycle billing which is the best thing for you as a consumer, but some credit card issuers try to be slick and used 2 cycle billing and that is what you want to avoid

Credit card issuers have to determine how much they are going to charge you in interest each month, so they find your average daily balance

What they do is they add up the amount that you owe each day in the cycle and then divide that by how many days are in that cycle

But if they get to use two cycles to do that and you carry a balance from one cycle into the next then your average daily balance for both cycles is going to be higher which means at the end of the day you are going to get charged more interest.

You really want to avoid any kind of credit cards that use 2 cycle billing.

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