When Applying for a Credit Card is a Bad Idea

“Should I apply for this credit card?” is a question that should go through your mind every time you think about clicking submit on a credit card application or to applying for a credit card over the phone or by mail. If you apply for a credit card that you’re unable to handle, the resulting problems could be more than you’re able to deal with. Here are a few times that applying for a credit card is a bad idea.

You’ve recently been denied.

Being turned down for a credit card makes it more likely that your subsequent applications will also be turned down, even if the future applications are with different credit card issuers. After being denied, wait before applying for another credit card. At least wait for the adverse action letter that explains why your credit card application was denied. Then, correct the problem before you try again. For example, if you were turned down because of an unpaid delinquency, pay off the balance before you try to apply again.

Your current cards are already maxed out.

Credit card issuers are wary of giving out new credit to someone who's already overextended. If your current credit card balances are already high, it’s likely that a new credit card application would be turned down. Your already maxed out cards are a sign that you should be reducing your balances instead of trying to create new ones.

You don’t have the income to repay a credit card balances.

Credit cards are not an income extension or replacement. Banks are now required to ask for your personal income before they give you a credit card. While this new rule does negatively impact some people who would otherwise be granted a credit card, it prevents others from getting a credit card that they really can’t afford. Don’t apply for a credit card until you have a reliable, steady income to repay what you charge.

You’re buying a home soon.

When they’re approving your loan application, mortgage lenders look for a steady credit history. Opening a credit card too close to the time you apply for the mortgage could hurt your odds of getting approved. The new credit card may cast some doubt on whether you’d be able to afford the mortgage payment. Hold off on credit card applications until after you’ve been in your new home for several months. That way you’ve had time to adjust to your new financial responsibility.

The credit card has high fees, high interest rate, or other bad terms.

Always read the credit card disclosure for any credit card you’re considering. The disclosure includes important details about credit card pricing like the amount of the annual or monthly fee, the interest rate, and length of the grace period. Avoid credit card with high fees and interest rates. You can probably qualify for something better even if it means getting a secured credit card.

If you take the time to be sure that applying for a credit card is a good idea, you'll keep yourself from taking on a credit card that you're not ready for or one that's not good for you. It's safe to assume that there will be great credit cards waiting for you when the time is right. So, don't rush.