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

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Credit card applications can be straightforward as long as you can meet the minimum financial requirements to get approved.

According to the latest figures, there were 15.5 million credit card applications between October and December 2020. People with credit scores between 660 and 719 had a 65% chance of having their applications approved, while those with lower credit scores had a less than 50% chance of approval.

If credit card applications feel daunting, there’s no need to worry. In this article, we’ve put together everything you need to know about credit card applications, including a step-by-step guide on how to open a credit card account.

Credit Cards

Almost everyone has a credit card these days. They can help you build personal wealth when used responsibly, but it can also be easy to accumulate debt and spiral into bad credit.

Why are credit cards important in daily life? 

When you open a credit card account, you receive a line of credit that gives you access to funds up to a certain limit. 

You can use this money to cover everything from your daily coffee to emergency auto repairs without having to pay upfront. Only at the end of the billing cycle are you required to pay off your credit card balance.

And it’s not just the quick access to money that makes credit cards popular. People use credit cards to build their credit history. They do so by making purchases with their card frequently and paying the monthly balance on time every month. A good credit history can help you to qualify for the best rates on mortgages, car loans, and other financial products that help you grow your wealth.

Credit card trends we’re seeing today

The immense popularity of credit cards today has led issuers to introduce policies that make credit card use safer and more attractive.

One of the most important trends we’ve seen is the adoption of a zero fraud liability policy by several credit card issuers. By federal law, credit card owners are not liable for more than $50 in charges for unauthorized purchases made on their cards. They cannot be legally prosecuted or made to pay any online or offline transactions that were made after their card was lost, stolen, or fraudulently used.  

Credit card companies are also trying to make their products more enticing. Many companies offer 0% introductory APR for the first 9 to 15 months to lure customers to new cards. Others offer cash advances, which are essentially personal loans customers can take against their available credit by withdrawing cash from an ATM using their credit card.

What are the pros and cons of credit cards?

Like any financial tool, credit cards come with several pros and cons.

For a start, credit cards can make it easier for you to manage your monthly expenses. They can help you track your spending by category and alert you when payments are due. If you make frequent grocery shopping trips or love to dine out at restaurants, some credit cards offer cash back rewards that can help you save up on these purchases. 

And to top it all off, credit cards are rarely linked to your checking or savings accounts, which helps protect your money from thieves and fraudsters.

At the same time, the easy access to funds can create the temptation to overspend. Because you’re not using your own money to make credit card purchases, you can get detached from your spending. Before you realize it, you could be mired in credit card debt that damages your credit score and can take years to pay off.

Choosing a bank 

When deciding which credit card to choose, it’s usually a good idea to do some research on the history and profile of the bank that issues it. This helps you know if the bank is aligned with your interests and values.

Understanding a bank’s investments

Banks are profit-driven institutions that make investments in businesses and commodities they deem lucrative. Depending on their values, they may offer loans to fossil fuel companies or renewable energy startups. Knowing a bank’s business priorities can help you as a consumer select one that’s most aligned with your interests and values.

You can find out more about a bank’s investments by going through their annual reports, investment portfolios, and web pages. External auditors and research organizations can also provide detailed information about a bank’s business practices. The Banking on Climate Change report, written by the Rainforest Action Network and its partners, for example, highlights the environmentally damaging activities financed by banks.

Your personal motivations 

As you do your research, you may want to keep an eye out for credit cards offered by banks that are aligned with your values and personal motivations. There are plenty of sustainable banks and credit unions that offer credit cards with low fees and reasonable interest rates.

For environmentally-conscious consumers, finding a bank that doesn’t invest in fossil fuels can be an excellent way to further control the environmental impact of your money. Environmentally friendly banks make it their priority to support community development projects and invest in low-carbon businesses. 

They understand the importance of helping their customers build their wealth and provide the appropriate financial products and services necessary to make it happen. 

Applying for a card

The easiest way to apply for a credit card is to do it on the credit card issuer’s website. As you’ll be entering sensitive personal details, make sure that you have a secure connection to the website.

Credit card rewards 

Most credit card application landing pages will have a brief outline of the bonus offers, rewards, APRs, fees, and policies of the credit card being offered. Make sure to read them carefully, especially the rewards section, to determine whether the credit card can help you meet your lifestyle and financial goals.

Some credit cards offer cashback that can help you pay off your credit card balance while others give points that can be redeemed for travel perks. For example, you might want a credit card with 3% cashback on gas station purchases if you drive long distances to work every day.

Eligibility requirements

The CARD Act of 2009 states that a credit card applicant has to be at least 21 years of age or 18 with a parent’s permission. This piece of legislation was introduced to prevent banks from coercing young adults to get credit cards they could not afford.

You’ll also need to present your social security number, which the bank will use to establish your credit history, and your reported income for the bank to decide how much of a credit limit to extend to you. In some cases, the bank may ask for proof of income such as a W-2 or a pay stub to make sure that you will be able to repay the debt.

If you’re planning to get an unsecured credit card, which is a card that doesn’t require you to put down a security deposit that doubles as your credit limit, you’ll likely have to have a positive credit history that’s above 700.

Step-by-step application process 

Once you’ve got your personal details in order, you’re ready to begin the credit card application process.

The first step you should take is to make sure that the credit card you want is aligned with your financial needs and values. Don’t just decide on a credit card because it has a tempting welcome bonus offer or an affiliation with one of your favorite stores. Try to imagine how the rewards, APRs, and fees will affect your finances a year into the future. Compare different credit cards to find one that will help you reach your goals.

Once you’ve selected your credit card, check to see if your current credit score meets the minimum required for the card. The higher your credit score, the likelier it is for your application to be approved. 

When you’re confident that you meet the eligibility requirements for the credit card, you can start entering your details in the application form. Most applications will ask you to provide a permanent address, your income, details of a savings or checking account you have, and other personal information. 

As hard credit inquiries on new applicants can impact their credit scores, you should try to apply for one credit card at a time to avoid bringing your score down and improve your chances of getting accepted.

Try the Aspiration Zero for an environmentally-friendly credit card 

Issued by the eco-friendly online financial platform Aspiration, the Aspiration Zero carbon credit card helps you fight climate change while you shop. 

Whenever you purchase with the Aspiration Zero, Aspiration plants a carbon offset tree for you through one of their reforestation partners. The trees help you eliminate your carbon footprint; once you’ve planted 60 or more trees in a month, Aspiration rewards you with 1% cashback on all purchases. 

Try the Aspiration Zero today to make a difference with your money.

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