What Should I Know Before Applying for a Credit Card?

New to credit cards? Thinking about applying for a credit card but not really sure how to go about it or what it entails? Not sure if you even qualify for a credit card?

Well, the good news is that applying for a credit card isn’t a difficult process. It’s really just a matter of supplying and submitting some personal information—name, address, phone number, Social security number, income, and more—which can typically be done online or with a hard-copy credit card application, and then seeing if the card issuer approves your application. 

But there are a few things you should probably know before applying for a credit card that could save you some time and effort and perhaps improve your chances of getting approved.

1. You Must Be At Least 18 Years Old To Apply For A Credit Card

You can apply for a credit card when you turn 18, but if you're under 21, it might be more difficult to qualify than if you're 21 years old or older. By law (Credit Card Act of 2009), if you're under 21 and want to apply for a credit card, you must have a co-signer and provide proof that you have sufficient income to pay for purchases that may be made with the credit card you’re issued.

If you’re not yet 18, it is possible to still possess a credit card with your name on it. You could be added to a parent’s or guardian’s credit card account as an authorized user. As an authorized user on someone else’s account, you get a credit card of your own and are authorized to make purchases on that account. Some credit card issuers have age minimums for authorized users while others do not. There are pros and cons to becoming or adding an authorized user that both parties should consider before entering into such a relationship.  

2. Application Requirements Vary By Card

There are many different types of credit cards for which you can apply, and each card issuer may have its own application requirements, so long as they’re legal. By law, for example, a card issuer cannot ask you if you’re widowed or divorced; they may only use the terms “married,” “unmarried,” or “separated.”

3. Your Credit History Usually Matters

When a card issuer approves an application for an unsecured credit card, they take a risk by extending an unsecured line of credit to a card member. Which means card issuers are typically more likely to approve applicants who have had credit before and demonstrated a positive payment history than applicants with no previous credit or a negative payment history.

If you have little or no payment history, or a less-than-impressive history, you may still be able to get a credit card issuer to take a chance on you and approve you for their unsecured card. However, applying for a secured credit card may improve your chances of being approved for a credit card. Once you’ve built a positive payment history with a secured credit card, you may be able to graduate from that card to an unsecured card with the same card issuer. Or, that same positive payment history could improve your chances of being approved for an unsecured card from another credit card issuer.

4. Your Income Will Likely Also Be Considered

While your credit score and what’s in your credit reports (especially your payment history) will almost certainly be considered by potential card issuers, it’s not the only thing they care about. Most card issuers also care about your income, namely because they want to know you have enough money coming in to pay them back for any purchases you might make with their credit card.

It’s important to understand that your income does not appear in your credit reports and is not factored into determining your credit score. That’s why most credit card applications ask applicants to disclose their income separately.

5. Applying Will Likely Generate A Hard Inquiry

When you apply for a credit card—or most any type of credit—the potential lender typically checks what’s in your credit reports by conducting a hard inquiry, which can lower your credit score.

In general, the impact of a credit card application on your score is small—typically 10 points or less. But, if you apply for multiple cards at once, each application could ding your credit for that amount, which could result in a more significant decline.

Applying for credit sparingly can help minimize any impact on your credit score. There’s also a way to assess your chances of being approved before actually applying for a credit card. Many card issuers, Credit One Bank included, offer you the opportunity to see if you pre-qualify for one of their credit cards prior to actually applying. By checking to see if you pre-qualify with a credit card issuer, you can find out if you’re likely to be approved for a credit card with that issuer before actually applying and generating a hard inquiry. Seeing if you pre-qualify can typically be done online, takes only a short time, and shouldn’t harm your credit score.

You may also receive credit card offers telling you you’re pre-approved for a card issuer’s credit card. This means the card issuer pre-vetted you by conducting a soft inquiry, which doesn’t harm your credit score. However, just like with pre-qualifying, you must still actually apply to be considered for the credit card, which will then likely generate a hard inquiry.

It’s important to note that neither a pre-approval nor a pre-qualification is a guarantee of being approved for a credit card. The only way to know for sure if you’ll be approved or denied is to actually apply for the card. 

6. Most Credit Cards Have A Grace Period, But Not All Of Them

Credit card companies are not required by law to give card members a grace period, but many do. A grace period is the time from the date your billing cycle ends until your payment is due. If you pay your bill in full during that window, you typically won't be charged any interest on purchases made with the credit card.

If you don't pay the entire balance owed, the card issuer usually discontinues your grace period. When this happens, you accrue interest on the existing balance, plus you start accruing interest on any new purchases going forward. You can typically reset a grace period if you stop carrying a balance—as in you pay the entire balance owed—but grace period policies vary by card issuer.

If the credit card does not have a grace period, you will pay interest on every purchase you make with the credit card, even if you pay off the entire balance owed each month. So, if you’re looking for a credit card that won’t charge you interest if you pay in full each month, it’s important to only apply for cards that offer grace periods. To see if the credit card you’re considering applying for offers a grace period, read the card member agreement prior to applying.  

7. Interest Rates And Fees Charged Vary By Credit Card

If you’re looking for a credit card with a grace period and plan on paying off the entire balance owed each month, then you may not care about interest rates. But, if you plan on financing any of your purchases, the interest rate you’re charged greatly affects how much you’ll pay in interest.

Interest rates can vary by card issuer, the type of credit card you apply for, your credit history, and even the transaction type. For example, interest rates are typically higher on cash advances than on standard purchases.  

Fees charged vary by card issuer as well. So, it's important to read the terms and conditions of the credit card agreement (aka the card member agreement or cardholder agreement) carefully before applying so you understand the interest rates and fees you could be charged.

8. How You Use Your Credit Card Affects Your Credit Score

Once you actually get a credit card, it can greatly influence your credit score—especially if it’s your only credit card or one of only a few. How you make your payments (your payment history) is a big influence because payment history makes up as much as 35% of your credit score. So, it’s critical to pay at least the minimum amount due on time, every time with a credit card.   

How you use your credit card can also influence your credit score by affecting your credit utilization ratio. This is the ratio of the total amount of revolving credit you’ve been granted versus how much of that revolving credit you’re actually using. 

When you open a credit card account, the card issuer assigns you a credit limit. That's the maximum amount you can charge on your card at any given time. The closer you get to that limit, the higher your credit utilization for that credit card will be. As you pay down the card balance, your credit utilization for that card decreases. The fewer credit cards you have, the more influential each individual credit card is in determining your total credit utilization ratio. For a healthy credit score, some experts recommend keeping your total credit utilization ratio below 30%.

Getting and using a credit card is a big responsibility. But using it responsibly can be a good way to establish, maintain, or rebuild your credit. So, don’t be afraid to apply for a credit card. Just be sure you know what you’re getting into before applying.  

If you’re in the market for a credit card, see if you Pre-Qualify for a Credit One Bank credit card. It takes less than a minute and won’t harm your credit score.