A credit card allows you to borrow funds from the card issuer. That can be your bank, credit union, or mobile money wallets. Various credit cards have various borrowing limits depending on your creditworthiness. For a person to apply for a credit card, they should be at least 18 years old. You will learn how to get approved for credit card with bad credit later, so stick around.
We have two types of credit cards that you can apply for today. We have secured and unsecured cards. Unsecured ones are the ones that require scores for you to get approval. Credit scores are numerical expressions of your creditworthiness. You must have borrowed loans or taken credit cards to have some scores. The credit bureaus, i.e., the bodies that calculate scores, depending on your loan and credit card usage.
The secured cards are the ones that require a security deposit for you to get the cards. Some credit cards require a particular minimum deposit, while others allow you to deposit any amount. Remember that the deposit amount you make determines your credit limit. Secured credit cards are mainly for building scores other than for borrowing purposes.
How to apply for a credit card?
You can apply for a credit card online or at a physical branch. Before applying for a credit card, you decide whether you want a secured or unsecured one. Once you decide on the best card to apply for, you can then visit the physical branch of the concerned financial company and apply. You can also apply by visiting the website of the financial company of your choice.
Before applying for your card, you must first open a checking account. The account allows you to deposit money for your everyday use. You need your identification documents such as your ID card, your Social security Number, an email address, phone number, and any other thing that your bank or credit union may demand.
Upon request for a credit card, your issuer will have to run a hard inquiry to see whether you qualify or not. That is if you apply for unsecured ones for fair, good, or excellent scores. Since hard inquiry negatively affects your FICO scores, it is wise to check them before applying for a card. You do not have to undergo the hard inquiry for secured ones because you already have your deposit as your security. Unsecured bad credit cards also do not require you to undergo hard inquiry because already you have bad scores.
What are the factors to check when applying for a credit card?
You should check various things when applying for a credit card. That ensures that you get the best card for your case. You can put the factors below into consideration.
i) Credit limit
You should consider a credit card with the highest credit limit possible, regardless of your scores. That way, you will have a large credit utilization ratio. If you are getting a secured one, you will have the chance to set the limit yourself by depositing as much as possible. If you are getting a secured credit card for rebuilding credit, you might not be interested in high limits since you only need to grow your borrowing potential.
ii) Annual Percentage Rate (APR)
You will need to repay your debt with interest for every card you get. That is what we call the Annual Percentage Rate. It is crucial to get the one with a low-interest rate to save substantial amounts.
When talking about fees, we are talking about the monthly fees, annual fees, foreign transaction fees, cash advance fees, etc. The less the fees, the more you save. Some fees may be hidden in the fine print, and you must be very keen to see what they have written there.
iv) Credit scores
When applying for an unsecured card, you must check on the scores for various cards to ensure that you get a card with the right scores. That way, you will avoid unnecessary hard inquiries. Do not forget that you can still get approved for a credit card with no credit when you opt for a secured card.
Some cards give you cash backs, miles, and points when shopping at particular stores. If you get such a card, the better because you will realize the value of your money. However, check that you won’t be lured by the rewards and forget to check other factors.
How to get approved for a credit card with bad credit?
As I mentioned earlier, it is possible to get credit card approval even if you do not have any scores. The first option is to get a secured card. Here, you will decide the amount of money to deposit to qualify for a credit card while considering the minimum deposit for a particular card issuer.
The more you deposit, the more your limit. You need to deposit the required amount in your checking account for secured cards, then get the card and activate it for use. The issuer will lock the deposited amount so that you cannot withdraw until you gain enough scores to get an unsecured credit card.
Alternatively, you can get bad credit cards as the issuer may not run a hard inquiry. You already have bad scores, and thus no need to ascertain that. You need to apply for the card and start using it for your payments. You can get an instant credit card approval for bad credit with no deposit if you apply for a bad credit card.
How do credit and debit cards differ?
Many people get confused about debit and credit cards. You might be among those who are wondering how the cards differ. Both are payment cards that you can use to buy goods and services at physical and online stores. However, they differ in several ways.
The first difference between debit and credit cards is that debit cards only allow you to spend what is in your checking account. Once you finish it, then you have to recharge your account. Credit cards allow you to borrow from your issuer and repay the debt every month.
Secondly, credit card issuers report your card usage to the credit bureaus. That way, you can get a credit score increment if you use your card well or a decrease if you use your card badly. A favorable credit score growth opens doors for better cards with higher limits. On the other hand, debit card issuers do not report your card usage.
Moreover, credit cards require you to apply if you are at least 18 years old. You can responsibly use loans compared to those below that age. For debit cards, even the school-going kids can utilize them.
How do secured credit cards differ from the unsecured?
Even though the two cards allow you to borrow from your issuer, they have differences that you should know. First, the secured ones require you to deposit money as security, while the unsecured ones only require your scores. That is the main difference between secured and unsecured credit cards.
Secondly, secured cards do not contact a hard inquiry on your scores. The unsecured credit cards for fair, good, and excellent scores usually contact a hard inquiry to see if you qualify. Credit bureaus, the bodies which provide scores, have records for all the borrowers as the financial companies have to report to them every month about every borrower.
Again, secured cards allow you to determine your limit by depositing the most suitable amount of money, while unsecured ones rely on your scores to determine the most practical limit to give you.
Furthermore, secured cards usually charge low-interest rates compared to unsecured cards for bad scores. Unsecured cards for bad credit charge high-interest rates because of the risks involved in the process. They can predict high chances of you defaulting at some point.
How long can you take to build credit?
That is usually a question of concern to people who want to build their scores for better loans and credit cards. Using a secured card or a credit builder loan, you can build your scores. But for how long does it take to build credit with a secured credit card? There is no specific time when you can increase your scores to good numbers, but when you use your card well, you can see a real increase in your scores after around six months.
A credit card refers to a payment tool that allows you to borrow funds from your issuer. It can be a secured or unsecured one. Secured cards are mainly helpful for building credit. They require you to deposit money for security reasons. The unsecured cards require a borrowing history for you to get them. You can either get a bad, fair, good, or an excellent credit card, depending on your scores.