What You Need to Know Before Applying for a Credit Card

Credit cards are very useful financial tools when used responsibly. However, getting one without understanding how it works and what you’re signing up for can lead to debt and other financial issues. In the section below, we’ll discuss everything you should know before submitting a credit card application.

How Do Credit Cards Work?

A credit card allows you to borrow money from the card issuer to make purchases. You can then pay back the money you borrowed in monthly installments. Credit cards differ from debit cards as they allow you to spend more than your bank balance and pay it back later with interest.

Some key things to understand about credit cards:

  • You receive a credit limit – this is the maximum you can owe on the card at any time
  • If you pay your full balance each month, there is usually no interest charged
  • If you carry a balance, interest is charged on the outstanding amount
  • You have a minimum payment you must pay each month, even if you have a balance

Benefits of Having a Credit Card

When used properly, credit cards have some excellent benefits:

  • Build your credit score: Making on-time payments helps establish a positive history.
  • Convenient payments: Many places don’t accept cash or checks. Cards are widely accepted.
  • Added protection: Credit cards provide extended warranties, purchase protection, etc.
  • Rewards: Many cards offer cash back, points, or travel miles on purchases.
  • No need to carry cash: There is less risk of theft or loss than cash.

For those looking for a reliable and rewarding option, consider a rupay credit card, which offers many benefits and additional features tailored to the Indian market.

Essential Things to Know Before Applying

Getting a credit card is easy, but there are important things to consider beforehand:

1. Assess Your Financial Situation

Be realistic about whether you can truly afford a credit card. Factors to look for include:

  • Your income: Consider whether your income can support credit card payments.
  • Your current debts: Avoid overextending with too much existing debt.
  • Your spending habits: Be honest if you struggle with overspending or impulse purchases.
  • If your finances currently can’t support adding a credit card, focus on improving your situation first.

2. Check Your Credit Score

Your credit score plays a significant role in whether you’ll get approved and, if so, your credit limit and interest rate. Checking your score beforehand avoids surprises. If your score is lower than you expected, hold off applying and work on improving it first.

3. Know What Matters in Applications

When applying, issuers decide whether to approve you based on factors like:

  • Income
  • Existing debts
  • Credit history length
  • Credit score
  • Your job and housing stability

Having these aspects in good standing makes approval more likely and means better terms if you open a card.

4. Interest Rates

Understand that interest rates vary significantly by card, from around 13% to over 25%. The rate you receive depends on your creditworthiness. It’s included in your card agreement. Higher rates make carrying a balance each month more expensive. Check rates beforehand so you know what you may pay.

5. Fees

Most credit cards charge fees like:

  • Annual fees – Some cards charge yearly fees just for having the card.
  • Balance transfer fees – Charged when transferring another balance to the card.
  • Cash advance fees – Charged for getting cash advances from ATMs.
  • Foreign transaction fees – Charged when making international purchases.

Consider fees when choosing cards and know what you must pay annually or per transaction.

6. Rewards and Benefits

Many credit cards offer nice perks like cash back, points, etc. Consider what types of rewards match your spending habits before applying. That way, you choose the card where you’ll use the benefits. Understand redemption values, caps on earnings, and program rules before assuming any rewards program will be valuable.

7. Credit Limit

The limit assigned to your account impacts your credit utilisation ratio – the percentage of your total available credit you’re using. It’s best to keep your utilisation below 30%. Getting approved for a very low limit may negatively impact this ratio. Check what limits card issuers typically offer to avoid getting stuck with an amount that needs to be higher to be useful.


Applying for credit cards without fully understanding them leads many people into debt issues and financial headaches. However, when armed with the right knowledge, they can instead be valuable financial tools. If you prepare properly beforehand by honestly assessing your budget, credit score, existing debts, and spending tendencies, you can select the right card for your situation and use it responsibly. 

This leads to benefits over time, like improved credit, convenient spending power, and even nice perks through rewards programs. 

Adrianna Tori

Every day we create distinctive, world-class content which inform, educate and entertain millions of people across the globe.

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