Criteria for a Credit Card

It's harder to qualify for a new credit card than ever before.

Credit card offers frequently come in the mail and via email. While some of these offers may be good deals, not all of them are competitive in terms of interest rates, introductory offers and fees. Getting a new credit card will require that the applicant generally meet certain criteria.

Significance

Each credit card company will have different criteria for who will or will not be eligible for its card. Generally, all credit card applicants must be at least 18 years of age. If an applicant is under 21, it will be necessary to prove that he has income that's sufficient to pay his bills each month, or he'll have to get a co-signer who's over 21 and has good credit.

Function

Companies that offer credit cards want people to sign up and start using their card. A credit limit is extended when the credit card application is approved; this limit and the accompanying interest rate will be based on the applicant's credit history and credit score (this is why the actual interest rate received may not be the one that an applicant sees advertised for the credit card). Having a low credit score could mean being rejected for a new credit card, or receiving a low credit limit and higher interest rate if approved.

Effects

According to Jeremy M. Simon at CreditCards.com, banks, as well as retailers, have all tightened their qualifications concerning who will and who will not be issued a credit card. Britt Beemer of America's Research Group says that even when store credit cards are given, credit limits are less than what they used to be (as of May 2010).

Considerations

If one company raises your rates or offers you high interest rates to start with, an applicant can apply for another card from a different lender if his credit is good. This also applies if the applicant has improved his credit score. If this is the case, the applicant should apply for another credit card with lower interest rates and then transfer the credit card debt to the new credit card.

People without a good credit history or with no credit history can apply for a secure credit card if they're rejected for a regular one. A secure credit card works like a debit card but also helps build up a user's credit score: The consumer deposits money into an account when he gets the secure card and then uses the card to make purchases; the amount is automatically deducted from the account the consumer set up. If an applicant needs to build his credit score, he should ensure that the secure card company actually reports to the major credit bureaus before he applies. The fees for a secure credit card may be as much as 25 percent of the credit extended, but with proper use and timely payment of bills, the applicant will soon be able to get an unsecured credit card with better terms.

Warning

More credit card companies are trying to recoup some of the money lost when the economy started to falter in 2008. According to CreditCardSpecialist.com, companies may increase their default interest rates if an applicant is late with or misses a payment. There are no limits on the interest rate that credit card companies can charge, but the Credit CARD Act of 2009, signed by President Obama on May 22, 2009, and put partially into effect on February 22, 2010, limits card companies to giving consumers at least a 45-day notice of any changes in the card's terms.

References

• Credit Card City: Credit Cards: Criteria for Applying
• Credit Cards: Retailers Tighten Credit Card Standards
• Credit Card Specialist: What Can Be Done About Changing Credit Card Requirements?
• Credit Cards: What the New Credit Card Law Means for You
• Credit Cards: What the new credit card law means for you