What Is Needed to Get a Credit Card?
There are a number of different types of credit cards and the requirements to obtain a card vary depending on the type of credit card as well as the credit card issuer. Potential credit card holders should understand the basic types of credit cards as well as the general requirements to be eligible for a credit card account. With this information, the consumer can determine which type of credit card best meets her needs.
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General Requirements
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When applying for a credit card, a consumer will need to provide information to the lender. Specific requirements to apply will vary but will include the consumer's address, Social Security number, employer or other income source, amount of income, and whether or not the consumer has a bank account. Lenders will review the consumer's credit report and score as part of the application process. The credit score needed for approval will vary between different credit card issuers.
Traditional Credit Card
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A traditional credit card works like a line of credit. The lender reviews the consumer's information and uses its own lending guidelines to determine whether or not to approve the credit card application. If approved, the lender will also determine what borrowing terms and credit limits to offer the applicant. Consumers with higher credit scores and income levels typically qualify for lower rates and higher credit limits. Consumers should not apply for numerous credit cards at the same time, as the multiple credit inquires lower the consumer's credit score, reducing the chances of credit card approval.
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Secured Credit Card
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Many traditional credit card lenders also offer secured credit cards. These cards work like a traditional credit card, but the consumer must put down a deposit to open the account. The consumer can then use the card up to the amount of the deposit. Lenders report account activity, including payment history, to the various credit reporting agencies. By making payments on time, the consumer will build a good credit score and may qualify for a traditional credit card. Many secured credit cards will also convert to a traditional credit card over time. These cards are useful for consumers with no credit or poor credit.
Prepaid Credit Cards
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Prepaid credit cards work in a similar manner to a secured credit card. Prepaid cards are convenient for consumers who need a credit card quickly as consumers can purchase these cards at various retail establishments. When purchasing a prepaid card, the consumer pays a fee for the card as well as pays for the amount added to the card. When the original amount placed on the card is spent, consumers can add money at retail locations or online. Some prepaid cards link to the consumer's bank account and will report account activity to the credit reporting agencies, helping the consumer to build a positive credit report.
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References
- Photo Credit credit card image by jimcox40 from Fotolia.com
