6 Questions to Ask Before Opening a New Credit Card
Are you thinking about getting a new credit card? Before you make your decision, there are a few questions you need to ask yourself. This is a decision that could have a negative impact on your finances if you’re not careful.
Here are six questions to ask before opening a new credit card account.
1. Do I really need this credit card?
Take a moment to think about your motive for getting a credit card. Although it’s great to get credit card rewards and other perks, if you have several other cards, it’s not a good idea to add another one to the pile. If obtaining more credit will put you in a situation where you’ll be tempted to charge more, it’s best to refrain from filling out that credit card application.
2. Will I be able to make payments in full and on time?
If you’re already struggling financially, getting another credit card won’t solve your problem. Rather, more credit will just extend your money woes. Instead of getting another card, address the real issue: cash flow. If you depend heavily on credit to get by, this means you don’t have enough cash to cover expenses from month to month. Work on remedying this issue by getting a side job and reducing unnecessary spending.
3. What’s the regular APR?
If you decide you do need the card and you’ll be able to keep up with payments, it’s time to assess the card’s terms. One of the most important questions you’ll want to ask is about the card’s annual interest rate. Don’t be pulled in by the card’s introductory rate. Getting a card with a 0% interest rate is great, but if it rises sharply after the introductory period is over, you might end up getting yourself into financial trouble later.
Before signing on the dotted line, know the date the introductory APR expires and what your regular rate will be. Read the credit card’s terms and conditions or call the company for this information.
4. What is the fraud protection policy?
Find out how unauthorized purchases are handled. Federal laws cap your liability for unauthorized charges at $50. However, there are many credit card companies that have $0 fraud liability. Furthermore, get details about the company’s fraud prevention and identity theft programs.
5. Is there an annual fee?
Find out if the card you’re thinking of getting has an annual fee. This fee is charged annually for the benefits that come with using a credit card. Not all credit cards have an annual fee (generally anywhere from $50 to $500), so make sure to read the terms and conditions. However, in some cases you might be able to avoid the annual fee. Two ways are to simply ask for the fee to be waived or transfer to a different card with the same issuer.
6. Is this the right credit card for me?
Make sure to choose a card that aligns with your spending habits and lifestyle. For example, if you don’t travel a lot, getting a card that offers travel rewards might not make sense. Depending on your needs, you might be better offer choosing a card with a strong cash-back rewards program. Resist the urge to automatically apply for any card offer that’s sent to you. Decide first if you’ll be able to benefit from the rewards.
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