The low advertised rate is not the rate automatically offered to each applicant. Before starting your card search, look at your credit report and get your credit score. Many credit cards offer tiered rates, based on your credit score. If your score is less than 680 (FICO), you can expect to get one of the higher interest rates. If it is higher than 760, you can expect to get one of the lowest rates.

 Take the time to read the fine print in the terms and conditions. This contains important information about the real card you are agreeing to, not just the offer that sounds good in promotions and advertisements. For example, the issuer can change your rate at any time for any reason, and they can dramatically increase your rate if you have a late payment with them, or any other lender. You will also find information about the APR you might be offered and other rates and fees. 

Don't apply for multiple cards at one time because creditors are wary of multiple applications, and this will affect your credit score. Apply for one or two, and if you don't like the offer, cancel the card. If you were turned down, or received a higher rate/lower limit than expected, get a copy of your credit report to see if there are issues you need to correct. If you get a rejection letter that doesn't give the reasons that you were rejected, contact the creditor immediately to get these because you only have 60 days to request this.

Visa, Mastercard, Discover and American Express

Visa and Mastercard are the most widely distributed bankcards, they are issued by banks and financial institutions. They don't issue the cards, but they provide the support for the individual banks that do issue credit cards. Visa and Mastercard set the basic rules, but the issuers sets its own rates, terms, rewards and benefits.

Discover and American Express are also bankcards. Discover's market share is growing, but it is less-widely accepted and can only be used in the U.S. If Discover or American Express is your primary card, you might want to carry a Visa or Mastercard just in case you try to make a purchase and they don't accept Discover or American Express.

Here are some tips for finding the best card:

This is the best and only choice if you carry a balance. The lower your interest payment, the more you can pay off towards your balance and the faster you can pay off your credit card. The interest rate is determined by your credit score. You will receive the best rate if your score is over 760. If your score is over 760 (FICO), Simmons and Capital One have cards with rates less than 7.5%.

 

Choose a card that does not have an annual fee. Since you are only interested in the rate, not rewards, there is no reason to get a card with an annual fee.

 

Low intro rate

Balance transfers give you a chance to transfer your credit card balance to a card with a lower interest rate. Issuers have used balance transfers as a way to "steal" accounts from other issuers. The terms for balance transfers were once very generous with no fees. However, as many consumers took advantage of these offers and jump from card to card at the end of each intro offer, issuers have changed their strategy and become stingy with balance transfers. Issuers have cut the intro period for many card from 12 to 6 months, even only 3 months, depending on your credit score. They have also increased the balance fee from no fee, to 3% with a $50-$75 cap, to a 3% fee with no cap.  Keep in mind that you can not transfer your balance to another card from the same issuer.

 Calculate how long it will take to pay off your debt. If you max out your payments and pay off your balance in less than a year, take advantage of a card that offers a 0% intro rate for 12 months. However, the trick is to avoid using the card for more purchases during that time. The purchases will be charged a much higher rate, and can defeat your purpose.  

If it will take more than a year to pay off your balance, look at a card that offers a low fixed rate on balance transfers. Keep in mind that one late payment can change your rate to a punitive default rate that can be as high as 30%.

 

Many cards will allow you to apply for the card first to see what your offer will actually be and transfer your balance within a few months to a year. Keep in mind that the median credit limit is $13,500. You may not be able to transfer your total balance, so start with the highest rates.

If you are transferring a balance, also pay attention to balance transfer fees. Most cards now charge a 3% balance transfer fee with no cap or maximum. If you transfer a $5,000 balance, your fee would be $150.00. Some issuers now include transaction fees when they calculate your finance charges. Incurring fees result in an APR exceeding 0% for the billing statement on which fees appear.

Know when you will start paying interest after the intro period is over. If your card says not interest through February, you billing cycle may actually end sometime in late January. Email your issuer to make sure you know when the 0% ends and when you have to pay off your balance to avoid fees or interest. Keep the email with their response, in case there is an issue later on.

 

These cards are a good choice only if you pay off your balance every month. If you carry a balance at least several times a year, look for a lower interest card, not a reward card.

 

Start with your usage, if you charge less than $5,000 per year, your best option is a general reward card like Blue from American Express. You can select rewards on lower levels like gift cards to restaurants and retailers for experiences and purchases that will actually be useful to you. You can earn these gift cards in the first year. If you have an airline reward card, and charge $5,000 or less each year, it could take 5 years to earn a free ticket (most cards offer a free, domestic airline ticket for 25,000 points).

 

If your usage is more than $50,000 per year, look for a card with unlimited rewards. Some cards cap rewards starting at $50,000. Or, you can have two different reward cards and get cash and a free airline ticket.

Finding the best reward card is difficult because the offers are difficult to compare; this is not comparing apples to apples. The best way to compare is to assume that the average reward percentage is 1%. Plug your credit usage into the reward formula to determine if that card would offer you more or less than 1%. If it is more than 1.5% of what you spend, the card could be a good deal for you.

Hotel reward cards have the most generous points distribution for everyday purchases, general purchases, and bonus points. Some hotel cards, like Choice Privileges Visa and Starwood American Express, allow points to also be redeemed for airline tickets or retailer gift cards.

 Reward offers are not as generous as they used to be and they are much more complicated. There are no longer  straight 5 percent cash-back deals on all credit cards. Now, 1 percent cards are more the norm. Some cards now have tiered reward programs as a way to encourage spending, giving a higher percentage of cash back the more the consumer charges.

Pay attention to the terms and conditions and notices from your issuer because they can change your rewards and your rate at any time. They can void your rewards if your payment is late, they can limit your rewards, or require they be redeemed during a specified time. Some require that you request your rewards, they will not automatically send them to you or apply them to your account. Some issuers, like Chase, charge a fee for redeeming your points for airline tickets. If you receive a cash reward, cash it as soon as you get it because cash reward checks expire after 90 days.

 

First Time Applying for a Credit Card

If you are applying for a credit card for the first time, have realistic expectations, you will probably not receive a card with the low advertised rates. To understand your financial situation, get a copy of your credit report so you will know what the creditor will pull up about your payment history and your credit score.

 

If you want a credit card, but have a limited credit history, apply for a low rate card to see if you will receive an offer. If you receive a credit card, keep it, even if the rate is high. Pay off the balance each month and call in 6-12 months to ask for a lower rate.

 

If you do not receive a credit card, do not apply for others assuming that if you try hard enough someone will give you a chance. Multiple applications over a short time will have a negative effect on your credit report.

Avoid subprime credit card offers. These target families trying to get out of debt and young people with no credit. Subprime cards have extremely high rates and fees; since these are prepaid and don't charge interest, the issuer makes money from the fees. The annual fee can also use up much of your available credit. They also do not help you credit history because they do not report your activity to credit agencies. Secured cards are a better option to build credit.

 

*Ask your bank or credit union about available credit cards. If you have a checking account then you already have a history and they may be more likely to offer you a credit card.

 

*Apply for a department store card or oil company card. These are easier to get than a Visa or MasterCard charge card. Apply for one then wait and see if you are approved. Keep in mind the interest rates for these are higher, so pay off the balance each month.

 

*Apply for a secured card. Secured cards are easier to get because there is no risk to the issuer. You make a security deposit for the secured card and the amount of credit limit is the amount of your deposit. Look for a secured card that will upgrade you to an unsecured card as you build a record of on-time payments.

 

*Before applying for a department store card or a secured card, make sure they will report your payment activity to the credit bureaus. Secured cards will not help build your credit score if they do not report to the credit bureaus. These cards also have the highest rates, so pay them off each month.

 

*If you use a department store or secured card correctly, you should start building a good payment history in 6-12 months and should be able to qualify for a major credit card.

 

*Other factors like work stability and income are also important. For example, Citi requires that you have an annual income of $12,000 to receive a card; the minimum income level for Chase is $14,400.

 

*Unfortunately, most consumer payments like rent, student loans, insurance, and utilities are not reported to the credit bureau unless there is a problem. Having a good payment history for a credit card, auto loan or mortgage helps build your credit score.

 

Apply for a Credit Card While You are In College

Apply for a credit card while you are a full-time college student. It is actually easier to get your first credit card while you are still in college, than to apply for your first card when you are newly independent and working. Issuers consider college students a good risk because if students get into trouble with the card, parents usually bail them out. However, don't apply for a card if you can't pay it off each month. Creating a bad credit history while you are in college will be much more damaging than having no credit at all.

Applying for a Credit Card if You Have Poor Credit

Secured cards are for those who have no credit or a bad credit history and can't get a traditional credit card. This card may also be an option for those who have a completed bankruptcy. Consider a secured card as a short-term band-aid to repair your credit. If used correctly, a good payment history with the secured card should improve your credit score enough to allow you to qualify for a standard card in 12 months to two years.

The secured card looks like a traditional credit card—a merchant will not know it is a secured card. The difference between the secured and unsecured card is the higher rate and fees for the secured card.

The deposit for a secured card determines the credit limit. If your deposit is $300, you will receive a Visa or MasterCard with a credit limit up to $300. The security deposit is not used to pay for charges but to cover the balance if the account is closed. The deposit is held until the account is closed. You must make the monthly payments on the card or the bank will turn the account over to collections, further damaging your credit score.

The bank is willing to offer this form of credit because it receives a security deposit and keeps it as long as the card remains open. The bank is safe because it does not lose any money, as it just keeps the deposit if the bill is not paid.

A secured card has fewer requirements than an unsecured card. You must have a telephone in your home, reside in the U.S., and have a valid social security number. While many applications are accepted, you are not guaranteed to receive a card. Unpaid tax liens or undischarged bankruptcies may prevent you from getting the card. Some issuers will not offer you a card if you have declared bankruptcy in the past.

Paying your bill on time will typically result in you being upgraded to an unsecured card in about 18 months. Some cards may also increase the credit limit to more than the amount of your deposit. After 12 months of good payment history, contact the issuer about converting your secured card to an unsecured card with a lower rate and a deposit refund. After two years of good payment history, you should qualify for traditional credit cards.

From time to time, your available credit may also be limited if you give your account number or card to a merchant that processes advance authorizations, such as a hotel, motel or car rental office. Such authorizations may limit your ability to make purchases and take cash advances on your account until the merchant cancels the authorization and the issuer releases the available credit.

Make sure that the issuer of the secured card you are applying for reports to the credit bureaus. This is necessary to rebuilding your credit history. If the issuer doesn't report your history, a good payment record will not affect your credit score. Some cards require an additional fee for this. Save yourself some money and choose a card that doesn't require this fee but still reports to credit bureaus.

Since every payment is reported to the credit bureau, use this card to build up your credit. Make your payments in full and on time.

 

If you apply for a card and do not want the offer you receive, contact the company and cancel the card. Don't just put the card in a drawer and forget about it. This open line of credit will show up on your credit report.