Credit cards are payment cards that allow you to borrow money from the issuer. Usually, you can get a credit card from a bank. Credit unions issue credit cards to the members. Interestingly, you can get free credit cards with money on them from banks and credit unions doing some promotions. Giving out credit cards with money on them is encouraging more customers to make more profits.
However, when the deal is good, you should be wise to think twice. A credit card issuer may give you a credit card with money, but eventually, you may find yourself spending more on the card on interest rates, monthly maintenance fees, late payment fees, annual fees, and the rest. There must be a way of returning the free money, which must be through interest rates and other types of fees.
In most cases, credit cards with bonuses require good to excellent credit scores. Rarely will you get a credit card for bad credit scores with some promotional features with money in them. Financial institutions know that people with good to excellent credit scores will likely pay for any loans; thus, luring them into their businesses makes sense.
How to get a credit card
There are two main categories of credit cards. They include unsecured and secured credit cards. Secured credit cards do not require you to have any credit history, and you only need to deposit a certain amount of money to act as security. Unsecured credit cards require you to have some credit history.
Before applying for a credit card from your bank or credit history, you need to check your credit scores from the credit bureaus. Credit bureaus include Experian, TransUnion, and Equifax. Once you know your scores, you can check the available credit cards in your bank or credit union. Alternatively, you can request your card issuer to show you the available credit cards according to your scores. Banks and credit unions can also inquire about your credit scores.
Once they see your scores, they will recommend the credit cards that go with you. If you do not have a credit history, you do not have credit scores, and you have to get a secured credit card. As I mentioned above, a secured credit card requires you to deposit some money to act as security.
You then borrow against the amount deposited. You can borrow an equal amount of money as your deposit or borrow a slightly lower amount depending on the requirements of your card issuer.
If you use a secured credit card properly, you will upgrade to an unsecured credit card and take your deposit for other uses. Secured credit cards help you to grow your credit scores if you do not have a credit history or have bad credit scores.
Some financial companies allow you to apply for a credit card online and then send it to your physical address, while others may need you to go to the nearest branch to get one. Above all, you need to know the terms and conditions of the credit card issuer not to find yourself in a mixed-up situation.
What is a credit score?
A credit score is the creditworthiness of an individual. In short, it helps to determine the possibility of an individual paying a loan. Credit scores range from 300-850, whereby 300 represents very poor while 850 stands for excellent.
Poor credit scores qualify you for low limit credit cards with high-interest rates, while high credit scores qualify you for credit cards with high credit limits and low interest-rates. Various factors determine your credit scores over time. These include the following.
i) Your credit utilization ratio
It is good not to use all your credit limits since it affects your credit scores negatively. Your card issuer may assume that you do not know how to manage your money well. You should use at most 30% of your limit per month. Financial advisors advise that you should not use more than 10% of your credit limit if possible.
ii) Mixing your credit
When you use various credits such as mortgage loans, auto loans, personal loans, credit cards, student loans, etc., you grow your credit scores to qualify for credit cards with higher limits. Mixing credits shows that you can handle your loans thus and adequately increases your credit scores.
iii) The frequency of using your cards
If you use your credit cards now and then, then your scores will increase slowly by slowly. However, if you are the type who keeps some of your cards dormant, you will likely have low credit scores.
iv) Your payment pattern
You should pay your loans on time to ensure that you grow your credit scores fast. If you are late on your monthly payments, your card issuer reports you to the credit bureaus, and you are likely going to lose your credit scores. It leads to a negative listing, and you might end up in the hands of credit recovery agents.
What are the factors to check when applying for a credit card?
There are various factors you should consider when applying for a credit card. They include the following.
1. Credit limit
Different credit cards have various credit limits for the same credit scores. You should be clever enough to choose the credit card with the highest limit so that you get a high spending amount. However, if you have an awful credit score, you will likely get a credit card with a low credit limit.
2. Interest rates
A credit card requires you to repay your debt with some amount on top, which is the interest for the borrowed amount. If you borrow $1000 and get an interest of 20%, then it means that you have to pay 1000+20% of $1000. That is equal to $1200. Therefore, it is good to investigate correctly and choose the card with the lowest interest rate.
3. Deposit
Some credit cards require you to make some deposit to use them. Mostly, these are credit cards for bad credit. If you have good credit scores, there is no need to get a secured credit card. The deposit safeguards the card issuer from the potential loss if the card user does not repay the loan.
4. Fees
Check on the fees that come with the card. Fees such as late payment fees, annual fees, monthly fees, and so on make card usage expensive. Make sure that you get a card with the lowest fees possible.
5. Bonus
Some cards come with free money, which they call a welcome bonus or any other applicable name. If you get a credit card with some bonus, then consider applying for it. However, check that it does not create some disadvantage somewhere with fees and high-interest rates.
How to get free credit cards with money on them
If you want a free credit card with money in it, you need to do online research and see the available cards. The following are the steps you can use to get such a card.
1) Think about your requirements
You do not just wake up and apply for a credit card. You have to think about your needs. Do you want the credit card to grow your credit scores, or do you want the card to borrow money to boost your finances when you do not have enough money? Knowing why you want the credit card saves you from indulging yourself in unnecessary debts.
Also, remember that in our case, we are looking at credit cards with free money. You can check the card with the highest welcome bonus and get started with it. Do not forget about the interest rates, the annual fees, and the penalties for late payments.
2) Apply for the card
If you notice a card from your bank or credit union with free money and likes its terms and conditions, then the first step is applying for the card. In most cases, you only need to log into your online account and submit your application. You then wait for the approval of your submission to proceed. You may even get a preapproval note from your bank or credit union, giving you an option to apply for another card after reviewing your eligibility.
It is also important to note that most banks and credit unions must pull a hard inquiry for your card once you apply for a credit card. That means your scores will be a bit affected, and you should be prepared for that. Ensure that you do not trigger too many hard credit inquiries as that may have adverse effects on your credit scores.
3) Make a good repayment strategy
Once you get the card, you need to have a repayment strategy for your loan. Remember that you will have awful credit scores with time if you do not pay for your credit card loan on time. If you cannot pay for your card usage, you should not apply for it since you will mess your credit scores. If you have a consistent monthly payment, then the better.
4) Understand the terms and conditions
Now that you have been approved and have drawn an elaborate repayment strategy, the next thing understands all the terms and conditions for the card. These include the following.
- Annual fee
- APRs, cash advances, and balance transfers(if applicable), and whether those rates are variable
- The minimum amount they will charge you each month if you carry a balance.
- Balance transfer fees.
- Any penalty APRs or fees.
- Foreign transaction fees.
- Calculation of your finance charges
Understanding the terms and conditions is the last section to getting your credit card into use. Remember to read the whole agreement document. If you think that the terms and conditions do not favor you, you are free to choose another card that suits you.
Why was my credit card application denied?
If you apply for a credit card, it might not get approval because your credit rating was too low. You can do the following.
- Get a credit card that matches your credit scores
- Pay off any outstanding debts with other borrowers
- Decrease your credit utilization ratio on other cards
- Mix various credits
- Start using any dormant credit cards
- Opt for a secured credit card
All the above help you grow your credit scores to qualify for the card of your dream.
Which credit cards have free money when you apply?
There are numerous credit cards with free money that you can apply for. They include the following.
i. Wells Fargo Active Cash Card
The card gives you an intro offer of $200. It does not have an annual fee and comes with a reward rate of 2%. It requires a score range of 690-850.
ii. Blue Cash Preferred® Card from American Express
It has an $0 intro for the first year, then $95 afterward. It has a cashback of between 1%-6% and gives you a $350 intro bonus. You require credit scores of between 690-850.
ii. Chase Freedom Unlimited®
The card has $0 annual fees and a rewards rate of 1.5%-5%. The account gives you an intro bonus of $200. Like the above cards, the credit card requires you to have credit scores of between 690-850.
iii) Citi Custom Cash℠ Card
Citi Custom Cash Card has $0 annual fees and a reward rate of 1%-5%. $200. It requires credit scores of 650-850.
How do credit cards differ from debit cards?
Debit cards are other kinds of payment cards that help you to buy goods and services. Even though both cards have various similarities to credit cards in their operation, they are different in that debit cards do not require credit scores to apply for. Furthermore, debit cards allow you only to spend what is in your account, while credit cards allow you to borrow from your issuer.
Bottom line
Credit cards are payment cards that allow you to borrow from your card issuer. There are two main types of credit cards which include secured and unsecured credit cards. Secured credit cards need you to deposit a certain amount of money as security, while unsecured credit cards require a credit history to give you a limit. You can apply for a credit card online or at a physical branch.
