Credit Card Application

Julia Cook asked:




How credit cards work once you own them is well-documented and there are plenty of guides to this.

However, how the applications for the things work – in other words, how you get hold of one in the first place – is less written about.

This is completely understandable but it’s an imbalance that this article hopes to put right at least a little bit with the explanation of some terms that are commonly encountered when making a credit card application and, perhaps equally important, what the applicant can expect.

To start, as with musicals, at the very beginning, let’s take a look at some of the terms encountered during a credit card comparison.

One of the most important of these is the interest rate. The headline rate will be written down as a variable APR.

APR stands for annual percentage rate and doesn’t reflect the interest that’ll be charged every month. That monthly rate is much lower and can be found though in the card’s terms and conditions. It should be noted that on a debt which is outstanding for a year, it comes to the same thing.

A variable rate means that the advertised rate is just a guideline.

In theory for this rate to be advertised it should be offered to at least two-thirds of applicants but, because the standard of applicants cannot always be anticipated, some studies have shown that less people than this generally actually achieve this headline rate.

If you only just meet the application criteria for a card, then, expect the interest rate that you’re offered to be higher than the one you see advertised. For this reason, it may be worth you while applying for a card when you are over-qualified.

Note that the APR should be noted even when looking at getting cards for their introductory rates – 0% balance transfer credit cards, for example – since this will be the rate charged on the balance if, for any reason, you’re unable to pay off the balance in full.

This is equally true of rewards and 0% purchase cards such as the Tesco clubcard credit card.

Another term that it’s worth knowing is annual fee. This is a flat, yearly fee which generally indicates a card with added extras such as insurance. If these options are unlikely to be used the annual fee should be avoided as much as possible.

From that point credit card applications can be made online or with a paper form but the card company will need to know details of income, address and other financial commitments.

Most applications will then require the applicant to sign to confirm the contract and then resend the information in return for the card.

Louis

Morgan Hamilton asked:




When it comes to credit card applications there are quite a few factors to consider. To me, I immediately think of the paper applications that the credit card companies send through the mail in their solicitations. They still do it, just not nearly as much as they used to.

The preferred method now is to apply online. The Internet has security features built into it that allow for personal information to be transferred safely. It is known as encryption technology and is very, very difficult for hackers and would be identity thieves to decipher.

Once more, it allows for the application to be sent instantaneously to the issuer. Some credit card companies including Discover and American Express even offer instant approval on some of their cards. In truth it is not instant approval but rather takes about 60 seconds.

60 seconds isn’t bad though is it? What happens is that the computer crunches the information that you provide and searches through several databases. It bases its decision on whether or not to approve your application on your credit history.

If you have a strong credit rating you should have no problems being approved. You may want to take a look at your credit score prior to submitting an application. A score of 720 or better is considered to be excellent. Consumers with a high credit rating qualify for the lowest interest rates.

I personally recommend finding a reputable credit card comparison website and applying online. The fact of the matter is that the paper applications that travel through the mail are not at all secure. I mean how hard is it to rip open a paper envelope? It happens, more than we would like to think.

Another advantage when we compare offers online is that we can go right to the specific categories of the types of cards that we are interested in. For example, if it’s business credit cards then there should be a category devoted specifically to them. Likewise for low interest, rewards cards and so forth.

Always be sure to read the terms and conditions in the disclosure statement before submitting credit card applications. Too often people will get caught up with the features and benefits and ignore the important financing details that they must be aware of.

The information I speak of includes such things as the annual percentage rate, otherwise known as APR, length of billing cycle, fees including annual fees and penalty fees, grace periods and information about how interest rates are calculated.

Connie