Understanding Credit Cards

Whether it is your first time applying for a credit card or you simply don’t know what to look for as you consider opening a new credit card, here are five key considerations to keep in mind before you apply for a credit card:

The Quality of Your Credit

Before you apply for a credit card, make sure to get a copy of your credit report and credit score because lenders use this information to set the terms of your card. If your score is lower than you anticipated, check your credit report for errors and correct those before you apply. Credit card comparison sites will give information on the credit quality needed for a certain card. Your credit score will help direct you to the cards to consider. Don’t waste your time applying for the wrong credit card or one for which you will not be approved. Credit card issuers pull credit reports for every application, so if you apply for too many cards at once, this may actually cause your credit score to drop.


APR, the annual percentage rate, is the interest rate for credit cards. Consumers with higher credit scores and better credit histories will usually have access to credit cards that have lower interest rates. Those with lower credit scores will likely only be approved for cards with higher interest rates. You’ll want to find a credit card with an APR that you feel is fair for your credit status. If you pay your credit card bill in full and on time each month, this shouldn’t be a concern for you. However, there may be a time when you carry a balance from one month to the next, so the APR is a consideration nonetheless.

Annual Fees

A very large percentage of credit cards do not have an annual fee. In addition, a number that do have an annual fee will waive it for the first year of having the credit card. If a credit card has an annual fee, double check to make sure the benefits offered with the card outweigh the fee.

Rewards and Benefits

Most credit cards offer some form of rewards and benefits to consumers as a way to get them to use the card. There are plenty of different types of rewards programs, such as cash back or airline miles. You can search for different rewards programs, and there are many available for those with good to excellent credit scores. Some credit cards specifically for students give you money for good grades!

Hidden Fees

Credit card companies are running a business, and that means they try to make money off of you. There are plenty of ways for card issuers to do this, including fees for transactions, balance transfers and cash advances. There are also late charges and fees for going over your credit limit. Make sure to read the fine print when you are signing up for a credit card. The fees that card companies charge are not going to be put in big bold letters on the application. Instead, you’ll have to find those fees on your own by looking through the credit card agreement and researching the card online.

Recommended Credit Cards for Students

If you are a college student looking to open your first credit card, you may want to consider opening a Secured Credit Card. These credit cards are meant for people that only want to use their credit card to build credit. They are usually protected with a security deposit so that you can’t overspend your limit. However, sometimes the credit limits are lower because they are for people with low or no credit.

Additionally, some credit cards are made just for students. One of the most popular ones is the Discover It Student Credit Card. It offers cash back on food and gas as well as giving you a $20 bonus for getting good grades. This card and those similar to it are made specifically for students with no previous credit.

Finally, if you are looking for another resource to begin your research, I encourage you to check out www.lowcards.com. It organizes credit cards by category, so if you are looking for a card that has no annual fee or a low APR, it’ll help you with a bunch of different options. Good luck in your searching!

Remember that credit cards aren’t scary, nor are they something to be avoided; however, it is important to not buy something when you do not have the funds for it. Spend wisely and steward your money well.

Want to learn more about credit and credit cards as well as a ton of other financial topics? Check out my podcast: Radically Fearless Finance!