Applying for a credit card

They come in your mailbox at home, and they show up in your email. You see signs in your favorite stores for them, and everyone from gas station employees to flight attendants enthusiastically describe the discounts and promotions they provide.

They’re credit card applications, and if you’re like most Americans, you probably get multiple offers to apply for new cards each week. Some offers sound too good to be true, and they are. How do you know whether a card is right for you, and how do you decide when to apply for a new card?

In this article, we'll discuss the following topics:

1. Quick answers to frequently-asked questions about the application process
2. Factors to consider when choosing a credit card
3. The application process
4. Reading the fine print
5. Getting your first card
6. The approval process

Quick answers to frequently-asked questions about the application process

How do I apply for a credit card?

You can apply online, over the phone, in person at your store or bank, or through the postal service. Be careful, however, that you are applying to a legitimate company. Safeguard your identity by never giving out personal information by way of an unsolicited phone call or email. If you're interested, tell the company that you'll call them back or visit the website directly, rather than through the link that was emailed to you.

What information will I need to provide for a credit card application?

Here are the pieces of information that you'll typically be required to provide (among other optional fields):

• Home address, phone number, and email address
• Current and previous employment (and their contact information)
• Gross annual income
• Social Security Number (although sometimes this is optional)
• Date of birth
• Information on other credit card accounts you hold

How long does it take to process a credit card application?

The waiting time varies from card to card and from company to company. Usually, the higher your credit rating, the faster the response time is for your application. Standard credit card applications may take up to 14 working days. With an excellent credit rating, you may be able to get approved within minutes online.

How do I get the best credit card offer?

The “best credit card offer” is subjective, since it really depends on each individual and your intended use for the card. For example, are you using the card for typical day-to-day purchases, or are you using it for business and/or travel? Are you just starting out building your credit, or are you doing a balance transfer?

That said, the best credit card offers typically have most or all of these characteristics in common:

• From a reputable bank or credit union
• Offer ongoing rewards for spending (either the same rewards rate for all spending, or higher rewards rates for specific spend categories such as travel or dining)
• Have a signup bonus (usually after you spend above a certain amount within the first 90 days)
• Have rates and fees (e.g., purchase APR and annual fee) that are low enough to result in the value of rates/fees you pay being lower than the value of rewards you earn

Factors to consider when choosing a credit card

A new credit card is a lot like a new relationship. Even if you know about the big stuff – your credit limit, the type of card you've chosen, and whether you qualify -- there are still lots of other factors that can affect the direction of your relationship with the credit card company.

If you want a long-term relationship – and not just a brief fling that ends poorly – you'll want to familiarize yourself (e.g., by reading the fine print in the offer terms and conditions, or by speaking on the phone with someone from that credit card issuer) with the following aspects of the credit card you're considering applying for:

• Whether the card offers any signup bonuses. Gone are the days of toasters and calculators. Banks now routinely offer cash bonuses when you sign up, and some even offer bonuses when you refer a friend.
• The specific fees you'll have to pay. Be sure to check if the card has an annual fee, as well as any fees you'll pay if you go over your credit limit or make a late payment.
• The card’s interest rate (APR). In addition to knowing the APR, you'll also need to know what factors can cause the APR to change. For example, if you're late making a payment or you go over your credit limit, your card company might bump up your APR.
• The quality of customer service. Never underestimate the value of a friendly, English-speaking customer service representative. If you can't work with customer service, it means it will be nearly impossible to deal with any problems that come up.
• Your existing relationship with the credit card company. If you have a bank account or other credit products with them, you may be able to get a package deal. If you have bad credit, some credit card companies are more willing to work with you if you already have other products from the company.
• How much (if anything) you'd be charged for balance transfers, and whether there are any limits on those transfers.
• The credit limit typically offered by that card issuer, and whether you have the option to increase that limit after a set period of time.
• Whether the card offers any additional perks, such as airline club memberships or discounts at your favorite merchants.
• Your liability for lost or stolen credit cards. Every credit card company has slightly different policies, and you'll need to know how to proceed if your card turns up missing or you notice a purchase you didn't make on your monthly statement.

The key is to take a holistic approach, examining each and every offering of the card rather than focusing on a single incentive. Take your time, and consider comparing several cards rather than falling in love with a single card. When the right one comes along, it will stand out above the rest of the pack.

Additional reward-related factors to consider

There are also some reward-related factors worth exploring. These include:

• Spending tiers. Some rewards cards require you to spend a certain amount in order to get the advertised perks.
• Hidden caps. Some cards, including some gas cards, reduce or limit the rewards you can get after you’ve spent a certain amount. Look out for phrases such as “up to” in card offers.
• Expiration dates. Since it often takes a while to build up enough points for an airline ticket, be sure your points or miles don’t expire before you can use them.
• Penalties. Some cards revoke your month’s rewards if you miss a payment, and some charge a reinstatement fee.

The application process

First, let’s take a look at the application process.

It’s surprisingly quick and easy. You can apply online, over the phone, in person at your store or bank, or through the postal service.

The main difference between applying online versus over the phone or in person is the personal touch. When you apply online, you're filling out the application yourself, rather than relaying your information to someone else. In most cases, you can get instant approval online if you meet the lender’s requirements.  

An advantage of talking with a lender’s agent in person or over the phone is that you can ask questions about the application process and get specific answers for improving your chances next time if your application is declined.

Tip: Make sure you're applying to a legitimate company

Safeguard your identity by never giving out personal information by way of an unsolicited phone call or email. It’s always safest to ask for a number and to call that number back or to visit a website directly, rather than through a link sent to you in an email.

Information you’ll probably need to provide

As you’re applying for a credit card, you’ll need to provide some basic information about yourself, such as:

• Home address, phone number, and email address
• Current and previous employment (and their contact information)
• Gross annual income
• Social Security Number (although sometimes this is optional)
• Date of birth
• Information on other credit card accounts you hold

Reading the fine print

Once you’ve narrowed down your options, it’s time to read the fine print that's on the application.

After reading all the catchy slogans about the card and its special offers, you will usually find the financial details you need to know buried under a link or heading labeled "terms and conditions", "rates and fees", or "disclosures." Be sure to read these sections thoroughly so you can avoid unpleasant surprises later. If you're a frequent international traveler, for example, make sure the card does not have foreign transaction fees.

Here are some “fine print” phrases you should know:

Getting your first card

If you’ve never had a credit card before, you may be wondering how you can apply for your first card. It may feel like the old Catch-22… How you can get credit when you have no established credit record?

There are a few options for first-time credit card applicants:

The approval process

Credit scores

Fair Isaac & Co (FICO) is all up in your business! This company looks at many factors, such as your payment, credit and employment histories, length of time at individual addresses, and whether you’ve ever filed bankruptcy to determine if you are going to pay your bills and if you are worthy of an extension of credit. Their determination of your credit-worthiness translates to a numerical score known as your FICO score, which ranges from 300 to 900. These scores are reported by three well-known credit bureaus: Experian, Equifax and TransUnion.

(Note: VantageScore is another type of credit score, which is used by some banks and other lenders instead of a FICO score. More details about VantageScore as well as FICO credit scores can be found in our article on credit scores.)

When you apply for a credit card, the financial institution checks your FICO score, and if it’s low, you'll end up leaving empty-handed. Different types of cards at different financial institutions are looking for certain FICO scores in order to approve you. In-depth research is required to determine what that score needs to be in order to obtain approval for individual cards.

Some issuers will offer you an annual fee card with a high interest rate and miserable terms if you are a bad risk, but still a risk they're willing to take. Typically, you only want to go down this path if you are sure you can do no better and you are in a position to make timely payments. If you need to build your credit and hike up your dismal FICO score, this may be your only option.

What if your application gets rejected?

Don’t be discouraged – even when you get a credit card offer that says you are pre-qualified, you can still get denied. (The phrase “pre-qualified” can sometimes be used by credit card companies as a marketing ploy to convince you to go ahead and fill out an application.)

If you feel that you've been wrongfully declined, or if you simply would like to know why you were declined, you can request that an "adverse action notice" be sent to you. This letter will include the specific reason(s) your application was declined.

Tips for getting your application approved

Quick tips

1. Research the credit card to make sure it's right for you. Check online for credit card review databases in which many consumers share the credit scores they had when they were approved as well as other tips.
2. Fill out your application carefully and honestly. Lenders will check your employment history and your salary. Make sure all information you supply is accurate.
3. Lower your current credit utilization rate. Pay off as much exiting debt as you can. Lenders want to see that you are a "good risk" and that you're able to handle debt responsibly.
4. Increase your available credit. In some cases, you can increase your odds of getting approved for a new credit card by requesting a credit line increase from one of your current lenders. This would be an option for you if you have been a long-time customer with a strong payment history with a particular lender. (But keep in mind that this request may require a hard inquiry into your credit report, which can drop your credit score a few points, and will stay on your credit report for 2 years.)

Make sure the most common decline reasons don't apply to you.

The three most common reasons your application could be declined are:

1. Too much debt. Banks and other lenders are cautious about extending more credit if you have high balances on your existing credit cards. Even if you have been keeping up with your payments, it's a good idea to pay down other loan balances before applying for a new credit card.
2. Too many inquiries on your credit report. Lenders look at it as a bad sign if you have applied for credit for a number of other accounts recently. This number includes car loans, insurance, and mortgages, as well as other credit cards.
3. Errors on your credit report. The Federal Trade Commission found in a recent investigation that nearly 25% of credit reports have errors in them. Order a free annual copy of your credit report (annualcreditreport.com) and read it thoroughly for accuracy to avoid any unwelcome surprises.

Apply for a card that typically approves people with your credit score.

Once you know your credit score and have studied your credit report for accuracy, research credit card companies that offer cards to people with your credit score range.

Here are some high-level rules-of-thumb about cards that a person might want to explore, based on their credit score range:

• If you have an Excellent credit score: You'll most likely (except for certain special circumstance) be approved for whatever credit card you apply for.
• If you have a Good or Very Good credit score: You might not get the very best credit card offers that are out there, but you'll probably be approved for the majority of credit cards that you'll come across.
• If you have a Fair credit score: You probably won't be approved for some of the more attractive credit card offers that you'll come across (e.g., the types of rewards cards that you'll see mentioned in credit card and travel blogs, but there are still plenty of lower-tier rewards cards (and non-rewards cards, e.g., low-APR and balance transfer cards) that you'd still probably be approved for.
• If you have a Poor or Very Poor credit score (or no score, due to no credit history): You probably won't be approved for a typical sort of credit card (e.g., rewards cards), but you can still get a secured card, which will even help you rebuild your credit over time.