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11/5/07

Things You Need to Know Before Applying for a Credit Card

Applying for a credit card is an interesting step along the financial journey of a person. There are many rewards and pitfalls accompanying credit card ownership and use, however, if you use credit responsibly, the rewards will shine through and the pitfalls will be minimized.

First, you need to know your purpose for getting a card. If you want a credit card to buy something you cannot afford or because it makes you feel like a responsible adult, then a credit card is probably not right for you. However, if your purpose is to establish a solid credit report and credit score and to build your creditworthiness, then a credit card can be an important tool to achieve these goals.

Second, you need to know if you have a credit report or a credit score. If you do, you need to obtain a copy and know what is contained in the report. If you do not have either, this information is also helpful. The point of discovering this information is to help you determine the credit cards for which you qualify. There is no need to apply for a card that has requirements that you cannot meet. Therefore, find out this information to narrow your available options.

Third, you need to know your limits. This means that you need to know your yearly salary and how high of a limit you can afford. Additionally, you need to know whether you want to pay over time or in a lump sum every month. Knowing these limits (i.e. yearly salary, affordability, flexibility of payment, etc.) will help you make a wise credit decision.

Last, you need to know the interest rates and fees associated with the card in which you are interested. Never get a card with an annual fee and focus on cards with low, fixed interest rates. Avoid cards that have a low introductory interest rate that resets to a high interest rate. Additionally, avoid cards with a variable interest rate. If undervalued by the applicant, these rates and fees can add up quickly and make the credit card have more pitfalls than rewards.

Discover your purpose for getting a card, find out your relevant credit information, know your limits, and find a card with good rates and little to no fees. Knowing these specific points will help you make a wise credit decision from which you could benefit for years to come.

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