While signing up for a new credit card isn’t exactly a life changing decision, it shouldn’t exactly be taken lightly. Regardless of whether or not you get approved, you’ll still end up with a hard inquiry once you hit submit. This will affect your credit score in the short term and you should try and protect your credit report at all costs. With that in mind, here the some of the questions I like to ask myself before submitting a new credit card application.
1. Why do I want this card?
If you cannot answer this question with something other than “signup bonus”, then you may want to reconsider your position. Think about what you would say to a reconsideration specialist if they asked you this question. What would you say?
2. What is the opportunity cost of using this card?
In other words, when you have this card and are spending money on it, which card in your wallet are you not spending money on? Is the trade off worth it?
3. Can I afford the annual fee?
While some cards waive annual fees in the first year, others do not. You should be aware of the cost, and feel confident in knowing that you can pay for it while still maximizing the benefits. It does not make sense to break even on the Amex Platinum because all of your signup bonus points went towards helping you pay the $550 annual fee.
4. What is my credit score?
Certain cards have certain credit score requirements. If your score is in the 500’s, you should probably wait to apply for the Chase Sapphire Preferred until its higher. Don’t waste a hard inquiry on a card you may not have a legitimate shot at being approved for.
5. How will I use the signup bonus?
Save for cases where the signup bonuses are so crazy that you’d be insane not to take advantage (think Chase Sapphire Reserve @ 100k), you want to have an idea of where and when you’re going to use the points from a signup bonus. You don’t want to wait until they’re about to expire to start thinking about how and where to use them.
6. Is this the best signup bonus available?
Depending on where you got the link to the application you may or may not be getting the best signup bonus available. Check around at different sites before hitting submit on an application to ensure that you’re receiving the best value possible.
7. How will I use this card after i’ve unlocked the bonus?
Does it have a category bonus that you’ll use? Does it provide lounge or other exclusive access? If it provides no additional value after the signup bonus, is it still worth the hard inquiry and minimum spend?
8. Is the total value less than $200?
$200 is an arbitrary number, but you should know what your number is. What is the minimum value that you need to get out of a card to make the hard inquiry worth it. For me, the number is around $300, I don’t want to signup for a card that offers less than $300 in initial value. If I do, and it prevents me from getting approved for a better card down the line id be upset.
9. Am I making a rash decision at a store checkout counter?
This is basically my way of saying that you should almost never sign up for a store credit card. $50 off your bill is not worth the hard inquiry, in my opinion. See my story about making this exact mistake.
10. Do I NEED the card?
Patience can pay off big dividends in this game. As an example, Starwood used to often raise their signup bonuses around August. Those who signed up in June were probably kicking themselves two months later. Have cards on your radar but don’t be in such a rush to signup that you miss out on the best deals.
11. Am I signing up for this because it says its a “Black” card?
There have been a number of new products released recently that include names like “Black Card”, “Gold Card”, etc. Don’t be fooled by marketing gimmicks. Seek out objective value, not smoke and mirrors marketing.
12. Can I safely meet the minimum spend requirement?
Nothing is worse than getting a card with a 50k signup bonus after $5k spending in 3 months, and then not hitting the $5k. If you cannot safely hit a minimum spend requirement without going into debt, or buying frivolous items that you do not need, then you should not sign up for the card.
13. Am I eligible for the signup bonus?
Credit card companies have added more rules and regulations of late in order to try and curtail the churn-and-burn methods of old. Each company has a different policy on who is and is not eligible for sign up bonuses. If you’re planning on getting the bonus, make sure you’re eligible ahead of time.
14. Have I put myself in the best possible position to get approved?
Pay off current debts? Few hard inquires as of late? Know my credit score? Have a plan for reconsideration? These are all things you should do ahead of time to improve your credit card approval chances.
15. Am I only applying because the card is metal?
Metal cards are cool, but they’re not reason enough to submit an application.
16. Do I want to add an authorized user?
Most applications will let you input your authorized users information at the end of the application. This way they can get sent the card at the same time yours gets put in the mail. If you don’t do it at application time you’ll have to call afterwards and that could delay the process. You want your authorized user their card ASAP to help with those minimum spend requirements.
17. Have I read the fine print?
No one wants to, but if can save you time and a headache later on if you read the fine print ahead of time. Hidden fees? Any special gotchas? If you’re not sure, contact us and we’d love to help.
18. Do I understand all of the fees associated with the card?
Annual fee, balance transfer, returned payment, interest charge, additional card holder, foreign transaction fees, etc. Know the fees ahead of time so you’r never caught off guard.
What questions do you ask yourself before submitting an application? Let us know in the comment section below.