This is a basic homework step that is often overlooked, and that can leave the would-be card user making a final choice without having all the facts they need at decision time. The most obvious one of course is to check your credit -- otherwise you might be adding debt to a bad situation.
Checking your credit
One of the first things the card issuer will do is pull a copy of your credit report. Issuers take a close look at your credit history to determine whether to take the risk of giving you a credit line.
You have a credit history if you have ever applied for a loan, borrowed money, taken out a mortgage, gotten a credit card, filed bankruptcy, failed to pay your taxes or had a lien placed against you in a lawsuit.
The credit report is compiled based on your social security number, name and address. It contains a full history of your financial life and all information is available on file for at least seven years from the date of last activity on each of your debts.
If you do not have a current copy of your credit report, then you should get one immediately. Everyone should know what their credit report shows about them at each of these three bureaus : Experian (formerly TRW), Equifax and TransUnion.
One easy way to establish a credit history is to get a " Secured Credit Card". This type of credit card requires you to place a security deposit with a bank. They will then issue you a credit card with a credit limit equal to part of, or all of, the deposit. When you get a secured card, make sure that the issuer reports to the credit bureaus so that you start to build a history. The secured cards that we recommend meet this requirement and report to the bureaus.
Good Credit and Bad Credit History
You will be able to choose from the largest variety of credit cards available if you have a good credit history. On the other hand, having a bad credit history will limit your choice of credit cards, however, it is not a surmountable problem. You'll just pay more, and the terms of your card deal will be much stiffer than the average cardholder has to deal with. But handle that deal and you can begin to rebuild your credit and get back to better and better card deals.
One of the key decisions you'll make when it comes to choosing and using a credit card is whether you will pay your bill in total every month or just pay off part of it.
Your "Payment Profile"
If you pay off just the minimum or even most of what's due, there's a balance left. You'll need to know how your credit card applies its interest rate to what's not paid to know where you really stand and what you'll be paying to maintain an unpaid balance.
Most credit card issuers use the "Average Daily Balance (including new purchases)" method of calculating interest. Once the Grace Period passes and any balance remains unpaid, this method provides for interest to be charged on the average daily balance outstanding on the statement from the date that each charge was made. Interest is then calculated each day on that balance. Any new purchases which you make are also charged interest from the date of the charge.
Transferring credit card balance to another credit card
Transferring your credit card balance, or balances, to a lower interest rate card can save you money. However, there are a lot of possible fees, penalties and 'catches' to beware of lest this move actually end up costing you money.
Some key factors before you transfer :
*Are there fees? The new card company might charge. The old one might charge you, too, for the transfer and even a penalty fee for closing the account.
*What fees and rates does the new company charge for new customers for new purchases?
*Will both card companies notify you when the transfer is done?
*Make sure that their regular finance rate after the introductory rate expires is no higher than the rate you are paying now.
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