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If you’re considering applying for a new card, it may help to determine the benefits you want, the fees you may encounter, and what your budget can handle.
“Credit cards could be one of the best financial tools that you use, but if you use them incorrectly, they’re one of the worst things you can use,” says Bill Hardekopf, CEO of LowCards.com, a credit card comparison website.
To help with this process, here are four considerations you may want to keep in mind as you are evaluating credit card offers.
1. Understand your financial situation to determine what you need in a credit card
Hardekopf says you should look at your financial situation and ask yourself, “Am I going to be able to handle this piece of plastic?” before considering any credit card offers. If you are able to pay your bills on time and in full each month, a new credit card might not be a problem. If you struggle to pay your bills on time, you may want to reconsider.
You’ll also likely want to review your credit report and score to stay informed of the accounts you already have open, with the understanding that a new card may affect your score and credit utilization ratio. You can obtain one free copy each year from all three major credit reporting agencies (CRAs) at annualcreditreport.com.
Part of reviewing your financial situation and possibly getting a new credit card will be to consider whether you’re mainly looking for rewards, a balance transfer, or a lower annual percentage rate (APR), the interest rate charged on the balance you carry. Until you’ve determined what benefits you’re seeking from a new card, you won’t know what type of card to consider and what to rule out.
2. Confirm the legitimacy and compare cards
When you are evaluating credit card offers, you want to be sure that it is a legitimate offer from a legitimate company.
“Every card sounds too good to be true,” Hardekopf says. It’s important to scrutinize offers to avoid falling victim to a scam; for real offers, scour the small print to prevent taking on an APR or grace period you can’t handle responsibly.
For offers arriving in the mail, do some research to learn about the company and the card being offered. Credit card comparison websites exist so that you can compare offers and terms to find one that suits your particular situation.
“It’s up to you to do the thorough research and compare that card to other ones that might be out there,” Hardekopf says. After you’ve done your research, you will hopefully find a card with the type of rewards or terms you want.
3. Understand the cost and apply it to your situation
Once you’ve singled out a particular card, consider its pros and cons in relation to your finances. If the card offers rewards, look at where you spend your money to weigh the benefits you’ll actually receive. A cashback bonus at gas stations, for example, isn’t much of a perk if you don’t own a car. Also, be sure to read the fine print carefully to determine any costs for fees that may be associated with the card, such as annual fees, cash advance fees, applications, and late charges. In addition, the fine print will also indicate any costs associated with exceeding your card’s limit.
“The tools that you need are your financial spending patterns, a pencil and paper, and a calculator,” Hardekopf says.
If the card offers a balance transfer (or other deal), calculate the actual value to your finances and see how it works for you. If the transfer fees and deadlines cost you more money than sticking with your current card’s APR and other fees, it may not be a good fit.
4. Make the decision best for you
Once you’ve evaluated a card’s pros and cons and understand how they’ll affect your finances, then you can decide whether to apply. The best option will depend on your individual financial situation, so don’t feel pressured into opening a card that won’t work for you.
“Credit cards offer a lot of protections that other types of payment don’t,” Hardekopf says, such as protections on purchases, lost luggage, or rental cars . Still, based on your credit history, a new card may not be the best decision. Be sure to explore all your options before applying for a credit card.
Dustin Pellegrini is a senior web producer and writer at Think Glink Media, where he specializes in reporting on identity protection and credit. He studied writing and visual media at Columbia College Chicago.
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
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