Applying for a credit card — and waiting for approval or denial — can feel as scary as taking a final exam or giving a public speech.
Knowing how to apply for a credit card is one thing, but knowing what issuers are looking for before you apply for a new card is really the first step to success.
“When you’re applying for your first credit card, you’re essentially asking a card issuer to take a chance on you,” says credit educator John Ulzheimer of The Ulzheimer Group.
Ulzheimer’s advice? Be realistic with your expectations.
“It’s very unlikely you’re going to get a large credit limit, and you may not even get a modest credit limit,” Ulzheimer says — and that’s OK. Building credit is a process, and you have to start somewhere.
Just remember: Depending on your credit (what lenders might refer to as your “creditworthiness”), you may not be ready to apply for a credit card right now, but you can take proactive steps that may help you get approved in the future.
If you think you’re ready, we’ve outlined how to apply for a credit card in eight steps. It all starts with checking your credit.
Here are the steps to apply for a credit card.
- Check your credit scores
- Determine what type of card you need
- Understand the terms on your credit card application
- Choose where to apply
- Check to see if you’re prequalified
- Prepare for a knock to your credit
- Use credit card best practices
- What if your application is denied?
Knowing your credit scores and what’s on your credit reports can help you determine what products to apply for. If you have fair credit, for example, you may not want to apply for a card that clearly states that only applicants with excellent credit will be approved.
Take some time to review your reports. As the Consumer Financial Protection Bureau notes, your credit reports may contain errors, such as old collection accounts that should have already dropped off your reports, that could prevent your application from being approved.
How do I dispute errors on my credit report?
Credit report errors aren’t uncommon and how you’ll dispute an error will depend on the type of error you have. Some errors may be account-related (a late payment that’s more than seven years old, for example) or incorrect personal information (wrong name listed).
If you’re a first-time applicant, it’s probably a good idea to shoot for a card with low or no annual fees and a low interest rate. You can do some comparison shopping on Credit Karma before you apply to get an idea of what you’re looking for. In most cases, one card should be enough to start with, as it limits the risk of you getting confused by multiple payment due dates.
If you have no credit history at all — or you’ve had trouble getting approved for an unsecured credit card in the past — you might still qualify for a secured credit card, which requires a security deposit and is commonly used to build credit.
Another recommendation: Apply for a retail credit card. Julie Marie McDonough, author of “How to Make Your Credit Score Soar”, describes retail cards as the “training wheels” of credit cards, as the issuers tend to be more flexible about who qualifies for a card.
But these cards have some drawbacks, including high interest rates and fees, so it’s important to use them responsibly.
3. Understand the terms on your credit card application
Once you’ve decided on the type of card you want to apply for, you’ll come across some credit card terms on the application or in the credit card’s terms and conditions. Here are some common credit card terms and what they mean, so that you can make an informed decision on whether to apply.
Annual fee — This yearly fee, charged by the card issuer, lets you use the card and reap any associated benefits, like cash back rewards. Many cards don’t carry annual fees at all, or waive it the first year, but cards with great rewards often have annual fees.
Annual percentage rate for purchases — The interest rate reflecting the total annual cost of the interest on your card purchase balance if you don’t pay the balance in full each month.
APR for balance transfers — The interest rate reflecting the total annual cost of the interest on your credit card balance amount that you transferred from one outstanding credit card to another.
There may be an introductory 0% APR that applies for a limited amount of time, which gives you a chance to pay down your transferred balance interest-free.
Balance transfer fee — Most credit card issuers will charge you a fee to transfer a balance onto your card. This typically ranges between 3% and 5% of each balance transfer.
APR for cash advances — The interest rate reflecting the total annual cost of the interest on the cash that you borrow against your credit card balance.
Cash advance APRs tend to run high and the interest starts accruing the day you borrow the cash. There may be better options if you need cash, but if you do take out a cash advance, it’s best to pay it off as quickly as possible before interest piles up.
Cash advance fee — Interest charges aren’t the only cost you’ll rack up when you get a cash advance — many credit card issuers also charge a cash advance fee per transaction. This fee generally ranges from 3% to 5% of each transaction.
Minimum interest charge — The least amount of interest you’ll be charged if you carry a balance on your card from one billing period to the next. It’s normally a small sum, such as $1. If you don’t carry a balance on your card, you won’t face a minimum interest charge.
Transaction fee — A transaction fee is an amount charged in addition to the APRs associated with your account for each type of transaction that a borrower makes.
One of the best examples is a foreign transaction fee, which some card issuers charge when a cardholder uses a card in another country or makes a purchase from home with a foreign vendor who runs the transaction in a currency other than the U.S. dollar.
A foreign transaction fee is generally 3% of the purchase price, but it depends on the issuer and the particular card.
Late fee — A card issuer charges you with these fees when you go over your credit limit or make a late payment.
4. Choose where to apply
Already have a checking or savings account at a bank or credit union? McDonough says applying for a credit card from a financial institution where you have an account may be a good idea, since you have an established history there.
Andrew Fiebert, co-founder of personal finance resource Listen Money Matters, agrees. “An existing banking relationship could improve your chances of getting a credit card application approved,” he says, “especially if you’ve handled your account responsibly, such as no overdrafts.”
5. Check to see if you’re prequalified
Some issuers allow you to see if you’re prequalified for their credit cards. This requires some work on your side — you typically need to fill out a short form and submit personal information, including your Social Security number. This triggers a soft inquiry, which, much like checking your credit on Credit Karma, won’t affect your credit scores.
If you’re rated as “preapproved” or “prequalified,” this means you’ve met all the lender’s criteria so far. But you still need to apply for the card and being fully approved will depend on other factors, including your income.
What are the types of information you need on a credit card application?
Here are some details you’ll typically need to supply on a credit card application, whether filling it out online or by mail.
- How long you’ve lived at that address
- Whether you own or rent your home or have another type of living arrangement
- Country of citizenship
- Country of residence
- Phone number
- Date of birth
- Social Security number
- Employment status
- Gross annual income
- Sources of income
- Financial assets and accounts
- Financial liabilities like a monthly housing payment or other loan payments
Keep in mind that application requirements can vary from issuer to issuer.
6. Prepare for a knock to your credit
When you apply for a new credit card, it usually triggers what’s known as a hard inquiry on your credit reports. Hard inquiries generally occur when a financial institution, such as a lender or credit card issuer, checks your credit reports when making a lending decision.
A hard inquiry can lower your credit scores by a few points and may stay on your credit reports for as long as two years. The good news is that a hard inquiry might not affect your scores as much as you’d think, and the impact usually decreases or disappears as time passes.
7. Use credit card best practices
If you get approved for a card, congratulations! A credit card can be a really useful tool to help build your credit over time. But now that you have it, remember that it’s a tool that requires maintenance and attention on your end.
What if your application is denied?
First of all, don’t despair. Many people have been rejected for credit cards, and many have later been accepted for other cards.
Secondly, weigh your options. You might want to try applying for a different traditional (unsecured) card. Or you might consider applying for a secured credit card, which requires a cash deposit that becomes collateral for your account.
But be very selective about additional applications, as each triggers its own hard inquiry that may hurt your credit.