How to Get a Credit Card: A Step-by-Step Guide

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"As a child, a library card takes you to exotic, faraway places. When you're grown up, a credit card does it."
-- Sam Ewing

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If you're wondering how to get a credit card and what is involved when applying for and obtaining your first credit card, you've come to the right place. Here's what you need to know and the steps you need to take to get approved for that new MasterCard or Visa card.

There are three key steps to take when aiming to get a credit card.

Step No. 1: Assess your financial situation

First off, you should give yourself a financial checkup. For example, are you carrying a heavy debt load -- and perhaps having trouble managing it, as well? If so, you're not the best candidate for a credit card, as credit cards can make it very easy to get deep in debt or deeper in debt. (There's an exception for those with debt and discipline, though -- a balance-transfer credit card, which we'll get to soon.)

It's vital to understand how dangerous it is to get mired in debt. It means you'll be paying hundreds, if not many thousands, of dollars in interest to lenders -- money that could have been put to far better use, such as for a new car, for a down payment on a home, for retirement savings, or even just for some great vacations and memories. You won't get many happy memories from paying hefty credit card bills.

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Anyone applying for a credit card should be mature and disciplined enough to handle it. You'll want to pay your bills off in full each month, in order to establish and maintain a clean credit record and a strong credit score.

What's a strong credit score? Well, basic (non-industry-specific) FICO scores, which are used by about 90% of top lenders, range from 300 to 850. Here's how the folks at FICO rate the scores:

FICO Score Range

Rating

Likelihood Borrower Will Become Delinquent

800 and higher

Exceptional

1%

740-799

Very Good

2%

670-739

Good

8%

580-669

Fair

28%

579 and lower

Poor

61%

If your credit score isn't high, you might want to delay getting a credit card for a while -- because many of the best credit cards require high credit scores. High scores will also net you the best interest rates when borrowing money. Here are the components of a FICO credit score -- it can help to know them if you need to increase your credit score.

Component of Credit Score

Influence on Credit Score

Payment history

35%

How much you owe

30%

Length of credit history

15%

New credit

10%

Other factors such as your credit mix

10%

Some great ways to boost your score include paying bills on time and reducing your debt load.

Step No. 2: Choose the best type of card and best card

Once your financial ducks are in a row, you'll need to start looking into which type of credit card will serve you best -- and then finding the best card for yourself in that category.

The kind of card that will serve you best will largely depend on your financial health and your spending habits. For example, if you're deep in debt, you'll need to pay off credit card debt and any other high-interest rate debt as soon as you can. Balance-transfer credit cards and low-interest rate credit cards can be good for that. Top balance-transfer credit cards will charge you no interest for a bunch of months while you work to pay off your debt, while good low-interest rate credit cards can help you spend less on interest payments.

If you're not deep in debt, consider getting a great cash-back credit card or two, that will give you cash back or rewards that can be redeemed, delivering value. A particularly powerful niche in the reward-card world is the travel card. The best travel credit cards will reward you for your travel-related spending (often including restaurants) and/or will offer discounts on such spending.

If you do a lot of shopping, think about where you spend the most money, because many retailers, such as Amazon.com, offer cards that give you discounts when you shop with them. Lots of credit cards offer a range of extra perks, too, such as insurance on some purchases, free shipping from a retailer, or perhaps access to VIP lounges in airports.

Once you know which kind of card is right for you, you can drill down and take a closer look at some contenders in the right category. Here are the kinds of characteristics you should seek in contenders:

  • No annual fee. Most credit cards don't charge an annual fee. Note, though, that sometimes a reasonable fee can we well worth it -- such as, for example, if a card charges $99 per year, and offers you $300 or more in value.

  • No penalty APR. A penalty APR is what happens when card companies raise your interest rate, often to 25% or more, if you're late paying a bill. Look in a card's fine print to see whether there's a penalty APR, and consider avoiding the card if it's there. Plenty of cards don't have this feature.

  • No balance-transfer fee. If you're planning to transfer a balance, some cards will charge you about 3% to 5% of the amount you transfer from another card. That can still be worth it sometimes, but know that there are cards out there that charge no such fee, at least in the initial period when you make your transfer.

  • Low interest rates. If there's a chance you will occasionally be carrying a balance, you should favor cards with a relatively low interest-rate range. Try not to carry a balance, though!

  • No foreign transaction fees. Without this feature, if you spend money abroad or with a foreign-based retailer, you'll see currency-exchange-related fees on your statement. This feature can save you a lot if you're a frequent traveler abroad.

  • Access to your FICO credit score. It can be helpful to be able to check your credit score now and then, especially if you're working on paying off debt and increasing your score. Many cards these days let you see your score.

  • Cash back -- or points or rewards -- that can be earned as you spend with your card. You can find cards that pay you 2% cash back overall on your purchases, and ones that offer up to 5% or 6% back on certain categories, such as supermarket spending. Some cards have pre-set cash-back rates for certain categories, while others rotate categories that earn extra-big rewards every three months -- sometimes even letting you choose the categories.

Step No. 3: Apply for your new credit card

Once you know what card you want, it's time to apply for it! If you're in good financial health with a solid credit score, this is likely to be the easiest step in the process. Don't apply willy-nilly, though. If you apply for a card that turns you down, that will end up on your credit report.

You might start by looking up the card online. You can probably apply for it right there on its web page -- or you can download a form to fill out. If you haven't done sufficient due diligence into the card yet, this will probably be a good last chance to do so, as the application process should include showing you the card's features and terms in great detail.

The application will require your divulging a lot of personal information, so be sure to be on a secure network and not filling out the form online at a coffee shop that offers free wi-fi. You'll likely need to offer your Social Security number, address, and income, among other things. Include all your income, but don't lie on the form, as that's fraud and could lead to some painful consequences.

If for some reason you're denied, call the company to ask what the problem was and perhaps to make your case verbally. If you're told that there's a problem with your credit history, look into it. You're entitled to a free copy of our credit report annually from each of the three main credit agencies -- visit AnnualCreditReport.com to order yours. (It's a good idea to review your credit record before applying for a credit card.)

Once you have your new credit card in hand, be sure to use it responsibly, paying your bills in full. Doing so will let the card make your financial life easier and better instead of worse.

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Selena Maranjian owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon, Mastercard, and Visa. The Motley Fool has a disclosure policy.