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Looking for a new credit card? It might be tempting to apply for the best credit card, even if you don’t have the best credit. While shooting for the card with the best rewards makes sense, it might not be the smartest idea. If you get turned down more than once, it can start hurting your credit score.
Your credit score matters quite a bit when it comes to the type of credit card you can get — or whether you can get one in the first place. For example, if your score is 600 and under, your only options may be secured cards. On the other hand, if you have excellent credit, meaning that your score starts somewhere at 750 or north of it, you can expect the best credit card perks, the best interest rates, the best everything. If you have good or average/fair credit, you should still be able to qualify for cards with decent perks.
When your credit is excellent, you shouldn’t have to settle for a card that doesn’t offer the creme a la creme. In fact, many cards for people with top-of-the-line credit offer hugely generous bonuses if you charge above a certain amount during a time period, say your first three months.
Here’s an example. Suppose you love vacations, so you choose a card that gives you travel miles if you charge at least $3,500 in your first three months. In exchange, you receive bonus points that, when you redeem them, equal hundreds of dollars in travel rewards. Such cards can also give you financial incentives for travel-related purchases and don’t charge foreign transaction fees.
If traveling is not your priority, many top-notch cards still give one-time bonuses if you meet a minimum dollar amount of purchases after signing on with the issuer. You just get the, say, $400 back in the form of another type of reward, such as a gift card.
In addition to these bonuses for new members, you should expect perks such as the lowest credit card interest rates around and a 0 percent introductory APR for a time period, such as one year. There are many great cards for people who have different priorities, so it is worth your while to compare at least several.
If your credit is good (with a score ranging from about 680 to 749), look for credit cards that offer many of the same things the top-tier cards do. You can likely enjoy similar perks, especially with travel cards, but perhaps not as lavish. For example, you still should be able to qualify for 0 percent APR offers and bonuses for meeting purchase minimums in your first few months. The bonuses might not be for as much money, but they are still incredibly nice.
It is a good idea to consider what matters more to you: the rewards/bonuses or a low interest rate. For example, if you’re unsure you will pay your balance in full every month, then a card with low interest rate may be preferable even if that means you forego some tempting rewards. On the other hand, if you believe you can and will pay your card in full every month, you may feel safer choosing a card with liberal rewards and a higher APR.
You still have some options when your credit is average or fair, meaning that it hovers between 600 and 679. The priority for many people in this range to find a card with the lowest APR possible versus one that offers rewards. However, if you do think you can make payments in full every month, you have more choices.
In general, though, don’t expect to see too many cards offering substantial rewards. Not surprisingly, the higher your score (say 650 to 679), the more reward cards you might qualify for or the lower your interest rate might be.
In this average/fair bracket, you can find cards that don’t charge annual fees. If you like to take trips, you should also be able to find a card that doesn’t charge foreign transaction fees. In fact, if it is a travel-oriented card you want, you might be able to snag one that people with good and excellent scores are also able to qualify for. Also, some companies give their cardholders double rewards at the end of their first full year.
The bottom line is that you do have choices with average or fair credit, but it helps to know what you want going into your search and to remain realistic.
If your credit is bad, you may not able to get a traditional credit card at all. However, you might qualify for a secured credit card. With this type of card, you put down a cash deposit, say $500. You are then allowed to charge up to $500 on the card and pay the balance every month. After a year (or some other time period), you may be able to convert the card into a traditional credit card and get your deposit back.
Particular things to look for include a card that reports to all three credit bureaus. This reporting should raise your credit score as long as your payments are timely. There are also many secured cards that do not charge annual fees and foreign transaction fees.
Your credit score is a good indicator of the types of credit card rewards and interest rates you can expect to be offered. People with average or fair credit may enjoy the best rewards from travel cards such as airline cards. On the other hand, the difference in rewards quality and APR rates is sometimes big enough that downloading your credit report and correcting any errors may end up making a huge difference. Or you can try a credit repair company to help you get over that hump to that next credit level. Here’s a list of the best credit repair services if you need it.
Applying for one credit card won’t affect your score. Apply for two credit cards might not even hurt your score; however, as the number increases, so do the chances that you are dragging down your credit score. When we apply for more than one loan at a time, it can look to lenders as if you are trying to take on too much credit. That’s why the amount of accounts you apply for within a certain period of time – whether it be loans, mortgages or credit cards – will have an affect on your credit score.
That is why it’s smart to apply for a card that corresponds with your credit score. Here is a good list of the best credit cards for each credit score range. If you don’t know your credit score, get a free (no credit cards required) credit score here.
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