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Choosing credit cards
Choosing a Credit Card: To choose the best credit card for you (and one which you'll have greater success in getting approved for), narrow the choices according to your current credit history. If you have no credit or bad credit, you can immediately disregard the high credit limit, high perks cards offered by major, well-known issuers. Typically these are platinum or titanium cards that allow you to make charges wherever the card is accepted, whether at brick-and-mortar retail stores, online stores, or by making purchases over the phone.
If you have fair or good credit, more options are available to you. If your credit rating is near excellent, your options increase.
If you don't know your credit rating, you should order a credit report before applying for a credit card. This will also help you spot fraudulent activity and errors so you can make corrections before you apply for a credit card. Why get rejected for credit, or pay higher than necessary interest rates, because of errors on your report?
Even if you don't know your exact score, you may already have an idea of your credit rating, particularly if you recently applied for credit but were denied.
So with your credit score in hand or your best guess in mind, you can consider credit card offers within the following three ranges:
Bad credit, no credit: Consumers in this category pose a high risk to issuers, so don't expect a large, unsecured credit limit with perks. Typical cards for consumers in this category are:
Catalog cards: Catalog cards; also referred to as "Merchant Cards", allow the card holder to purchase items on credit from a specific vendor or from a certain catalog. Most of these cards are marketed as "guaranteed" approval because they limit how the card may be used. Examples of this type of card are those offered by retail stores, whereby the card can only be used for purchasing products from the retailer and not from any other store, nor can such cards be used for booking airline or motel reservations.
Secured cards: Secured cards offer more flexibility than catalog cards, but do not provide any unsecured line of credit. Purchases are "pre-paid" by the card holder depositing funds into the account.
Troubled credit: Consumers in this category will have a few more options in regards to unsecured credit cards, but again don't expect to be approved for large, unsecured credit limit cards with perks. Typical cards for consumers in this category are:
Sub-prime credit cards: Sub-prime credit cards are unsecured, low credit limit cards, which may award higher credit limits as the card holder's credit rating improves. The key here is to find a sub-prime credit card that reports timely payments to the major credit bureaus so the holder's credit report score may improve. These cards generally require activation fees.
Good credit: Consumers in this category are sought after by major card issuers, which is the reason why so many offer perks and special introductory or balance transfer rates. Typical cards for consumers in this category are:
Platinum and Titanium credit cards: Regarding platinum and titanium credit cards, do not confuse catalog platinum or titanium credit cards (often marketed as "guaranteed" approval), with platinum cards offered by major issuers such as Visa or Chase. The "real deal" platinum and titanium cards allow the card holder to make purchases wherever the card is accepted and is not limited to a certain retailer, vendor or catalog.
Since typical platinum and titanium credit cards require an above average credit rating and income level, issuers will often offer 0 introductory on purchases or balance transfers, plus other perks such as mileage points, in order to gain new customers. If you qualify for such cards, resist the temptation of taking full advantage of the credit limit, or you may discover you've gotten yourself into too much debt and jeopardize your good credit standing.
When considering these cards, three key issues you may want to consider are:
1) If you have balances on existing cards, would there be a balance transfer fee or a separate interest rate for transfers? Are special rates only for a certain period of time? And is there a limit as to how much debt you can transfer?
2) What is the annual fee, if any, and the interest rate? Does the interest rate apply to balance transfers or only to new purchases? Is there a fee for balance transfers?
3) Review credit card benefits: What are the perks, and what perks will benefit you the most? If you travel frequently, you may prefer a card that offers frequent flyer miles, rental car or lodging discounts. If you plan to use your card mainly for shopping, you may prefer a card that offers a cash back percentage or free extended warranty coverage.
Before applying for any credit card, be sure to read the full terms and disclosure. If you don't understand a particular term, call the issuer and ask for clarification. Be sure you're aware of any fees, over-limit charges, and if the interest rate may be changed for any reason, including if you are ever late making a payment or exceed your limit. Additionally, ask the issuer if they will increase your interest rate if you are late making payments on other bills, such as utility bills or mortgage payments.
Lastly, if you already have a credit card but you're shopping for a lower interest rate, first ask your current issuer if they will lower your rate. Let them know if you've received better offers. If you've been a good customer, many issuers will work hard to keep your account active and to please you.
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