Finder makes money from featured partners, but editorial opinions are our own. Advertiser disclosure

How do credit cards work? A beginner’s guide

Learn the basics of credit cards — and how to choose your first one.

Learning about credit cards, and how to use them responsibly, is a great first step toward financial health. So, if you’re wondering, “How do credit cards work, anyway?” here’s a guide to get you up to speed.

What is a credit card?

A credit card is a small plastic card that lets you borrow money from a financial provider. If you borrow funds for a significant period of time, you’ll pay a fee for the privilege — called interest.

Use credit cards if you want a secure and convenient way to pay. They’re also excellent tools to build your credit score — a three-digit number that represents how reliably you’re expected to pay your debt.

Beware: A credit card isn’t free money, and you’re always expected to pay back whatever you borrow. There will also be a maximum you can borrow at a time.

    How do credit cards work?

    Here’s the lowdown on how credit cards work. Once you understand the mechanics behind your card, you’re on your way to using it responsibly.

    Credit card mechanics

    Billing cycles

    Swiping your credit card means that you’ll repay your bank later for your purchases. But when do you have to pay?

    To find out, you need to know how long your bank’s billing cycle is. After each cycle, your bank will collect all the transactions you’ve made and send you a bill.

    A billing cycle doesn’t necessarily line up with each month. It can start from the 1st to the 30th, but it could also start from the 25th of one month to the 25th of the next month, and so on.

    To know for sure how long your billing cycle is, ask your card provider. You’ll also see how long the cycle is once you receive your bill.

    When you receive your bill — called your credit card statement — it’s time to decide what to pay. To avoid paying unnecessary interest, it’s a good idea to pay your entire balance. But you can also choose to pay the minimum amount possible or some amount in between. The amount you pay will decide how much interest you owe.

    You don’t have to wait for your bill to arrive before repaying your bank. If you’d like, you can pay off your balance immediately.

    • How long is a billing cycle? A billing cycle is usually between 25 and 31 days, but it can be longer or shorter depending on the card or provider.
    • What is a balance and credit card statement? A credit card statement is a summary of all the transactions you’ve made on your card over the last billing cycle. It’ll show information like how much you owe to your card provider, the minimum amount you can pay and potential late fees. Your balance is the amount of money you owe to your credit card provider.

    How does interest work?

    Many people shy away from credit cards because they’re worried about interest. Interest is money you pay to your bank as a fee for borrowing money or delaying payment on your purchases. In short, it’s a charge for the privilege of borrowing money.

    However, you won’t owe interest if you pay your bill in full within a certain amount of time. Your card provider will typically give you a grace period to pay off your purchases. If you pay your entire balance within this period, you won’t be charged interest.

    If you pay less than your full balance by the due date, your remaining balance will accumulate interest. At the very least, you need to repay the minimum payment, typically 1% to 3% of what you owe. Be careful about carrying a balance on your card, which could cause your credit card debt to snowball.

    How long is a credit card grace period?

    Credit card grace periods usually last between 21 and 25 days. Per the Credit CARD Act of 2009, a grace period must be at least 21 days if a provider offers one.

    Card issuers don’t have to offer grace periods, but the vast majority do.


    Many providers charge an annual fee to use their credit card — a fee you have to pay once a year to remain a cardholder. Annual fees can eat into rewards you might earn, so factor them in when looking for a card.

    You may see an introductory annual fee for the first year. This means you’ll pay a discounted fee for the first year and then the stated annual fee every year thereafter.

    Keep an eye out for other fees that could include:

    • Balance transfer fee. For moving your existing credit card debt to your new card.
    • Cash advance fee. For using your card to collect cash.
    • Foreign transaction fee. For using your card outside the US.
    • Late payment fee. For paying at least your minimum after your statement due date.
    • Returned payment fee. For sending a payment that bounces — for instance, if you enter your checking account number incorrectly.
    • Returned check fee. For paying with a check that’s returned due to insufficient funds or a closed account.

    Revolving credit

    A credit card offers revolving credit, which you can think of like a rechargeable battery.

    Here’s an example: Let’s say your card has a $1,000 credit limit, and you make a $400 purchase. That means you have $1,000 less $400 — or $600 — in available credit. At this point, you can spend only $600 more on your card before you hit your limit.

    However, let’s say you now pay $300 toward your balance. This raises your available credit to $900 ($600 plus $300). Now you can spend up to $900 on your card. In a sense, you’ve “recharged” your card’s spending power.

    Credit cards are different from non-revolving credit sources, which don’t offer more credit after they’re paid off. Home loans and car loans are a few examples.

    Charge cards

    While browsing credit cards, you may run into the fabled charge card. With this type of card, you’re required to pay your balance in full each month.

    Today, only a handful of card providers, such as Brex, offer charge cards to businesses.

    Back to top

    How do credit card companies make money?

    • Interest. The average American has $5,551 in credit card debt, and card companies make big money off interest payments.
    • Interchange fees. Issuing banks charge fees to merchants for processing credit card transactions.
    • Card fees. Annual fees, balance transfer fees, cash advance fees, late fees and more add to a provider’s coffers.
    • Selling customer data. Some card companies sell anonymous, aggregated customer data to third parties.

    Why you should pay your credit card early

    If your finances allow, try to pay your credit card early because you get to:

    • Build your credit score. Paying your balance before it’s due can help you increase your credit score over time.
    • Free up your credit. Your credit limit is the maximum amount you can spend on your card. Once you pay off your existing purchases, you free up available credit for new purchases.
    • Avoid interest. You won’t pay any interest on your purchases if you pay them before it’s due. Also, late payments could impose penalty interest rates of more than 30% and it could remove a 0% intro APR period if you have one.
    • Avoid fees. Many credit cards come with late payment fees if you don’t make the minimum payment before it’s due. Making early payments avoids additional fees.
    • Graduate to a better credit card. If you’re starting out with a secured credit card, many card providers return your secured deposit while letting you keep your card and the benefits.

    How to pay your credit card early

    First, you need to set up a budget for making early credit card payments. Once you have that covered, here’s how to pay early:

    • Set up autopayments. The easiest way to set it up is via your online credit card account. You can set the amount at the minimum payment, the full amount or any other amount you want.
    • Set up reminders. If you wish to review your statement before paying it off, set up recurring reminders on your calendar. You can also opt in to reminders monthly before your card’s due date.
    • Change your payment due date. Some card providers let you move your payment due date. Use this feature to make your payments closer to your payday.

    What happens if you can’t pay your credit bills on time

    As long as you make the minimum payment — between 1% and 3% of your balance — before the due date, you only accrue APR on purchases on your remaining balance until you pay it off.

    But if you fail to make the minimum payment, you’re on the hook for a late fee and could incur a penalty APR of 30% or more, depending on the card provider. In addition, your credit score suffers.

    How are credit cards different from other cards?

    With a credit card, you essentially borrow money that you’ll pay back to your bank later. Here’s how it differs from other types of payment cards:

    • Debit card.
      The primary function of a debit card isn’t to borrow money. Instead, you use it to spend money from a checking account.
    • Charge card.
      With a charge card, you must pay your balance in full each month. This is different than a credit card, which lets you carry a balance from month to month.
    • ATM card.
      This is a card you use at ATMs — such as for withdrawals and deposits and to check your balance. While you can withdraw money with a credit card, this counts as a cash advance that usually comes with high fees and interest rates.

    Types of credit cards

    There’s a universe of credit cards out there, and it can be fun searching for your ideal pick. Here are some of the different card types you’ll find on the market.

    Basic credit cards

    A basic credit card comes with very basic features and few of the perks or rewards you might get with other cards. Common features may include low-interest rates or a $0 annual fee.

    • Low interest. This type of card can offer a low-interest rate forever or a very low-interest rate at the beginning that reverts to a higher rate later.

    These are designed to help you save money over time if you have to carry a balance.

    • Balance transfer. With a balance transfer, you move your credit card debt to another card. A balance transfer card gives you a low-interest rate when you move your debt.

    Some basic cards may carry this feature, though you’re more likely to find this on a dedicated balance transfer card.

    Basic credit card pros and cons


    • Cheaper to maintain.
      You will be saving money immediately with no annual fees.
    • Lower interest fees.
      Interest fees can represent the largest cost when it comes to credit cards, so having a card with low or no interest fees can translate into substantial cost savings.
    • Less temptation to spend.
      Having a lower reward earning means you won’t be tempted to spend unnecessarily.
    • Less possible debt.
      If you have a lower interest rate on purchases, you’re more likely to be able to repay your balance in full and avoid falling into debt.


    • Limited extra features.
      If you’re after premium perks, such as lounge access, companion certificate or travel credit, a basic credit card might fall short.
    • Less value.
      Depending on what sort of spender and cardholder you are, you may find that basic credit cards offer less value in terms of features and privileges. For example, if you are a big spender and frequent traveler who always pays off your monthly account balance in full, you’ll probably get more value from using a premium airline credit card even if it has an annual fee.
    • Less available credit.
      Although it’s not always the case, basic credit cards tend to have lower credit card limits than premium cards.

    Rewards credit cards

    Rewards cards provide bonuses for your everyday spending. They also often come with lucrative signup bonuses.

    Credit repair cards

    A credit repair card is relatively easy to get. It won’t offer top-notch rewards, but it does let you build or rebuild your credit slowly.

    • Secured. Put down a security deposit to open a secured card. That deposit becomes your line of credit.
    • Subprime. These cards are typically for customers with poor credit scores and can be very expensive to use.
    • Prepaid. Before you can use this card, you load it with funds.

    Specialty credit cards

    • Business. With this card type, you’ll typically get points, miles or cash back on business-related expenses.
    • Student. A great choice if you’re a college student, these are designed for students with little or no credit history.
    • Store. You can use store cards only at select retail locations or websites, but you’ll get discounts and rewards when you do.
    • Gas. Get discounts when you spend on fuel with this card.

    Charge cards

    Credit card terms you should know

    Here are a few important terms you should know while you look for a credit card. You can find many of these terms in your card’s Schumer Box.

    Credit card terms


    You’ll typically see a credit card’s interest rate expressed as an APR, short for annual percentage rate. This makes it easier to compare interest rates between cards.

    Some cards offer an introductory APR. An intro APR means you’ll receive a special APR for a specified period of time, after which your APR will increase. For example, you may get a 0% intro purchase APR for 12 months, after which your APR will revert to 20%. To avoid accruing interest, pay off your balances before the 12 months are up.

    Fixed vs. variable interest rates

    A fixed interest rate stays the same for the entire time you have your credit card. You won’t find many fixed-rate cards, because the Credit CARD Act of 2009 made it more difficult for card providers to change interest rates at will. Essentially, it became more difficult for providers to advertise fixed rates and hike APRs later.

    You’re much more likely to find a card with a variable interest rate. This means your APR is typically pegged to the prime rate — the interest rate banks give to those they consider most creditworthy. Your provider will usually use the prime rate plus a certain percentage to determine your APR.

    To figure out your interest rate, you can keep track of the prime rate published by The Wall Street Journal. Alternatively, periodically ask your card provider what your APR is.

    You may also see something called deferred interest. This is interest you won’t have to pay if you pay off a purchase within a specified period of time.

    The Best Buy Credit Card offers deferred interest on select items.

    “Deferred interest” does not mean “zero interest.” If you don’t pay off your purchase in full within the specified time period, you’ll be charged interest starting from the day you swiped your card.

    Revolving credit

    A credit card offers revolving credit, which you can think of like a rechargeable battery.

    Here’s an example.

    • Let’s say your card has a $1,000 credit limit, and you make a $400 purchase.
    • That means you have $1,000 less $400 — or $600 — in available credit.
    • At this point, you can spend only $600 more on your card before you hit your limit.

    But this is where the magic of revolving credit comes in.

    • Let’s say you now pay $300 toward your balance.
    • This raises your available credit to $900 ($600 plus $300).
    • Now you can spend up to $900 on your card. In a sense, you’ve “recharged” your card’s spending power.

    Credit cards are different from non-revolving credit sources, which don’t offer more credit after they’re paid off. Home loans and car loans are a few examples.

    Credit card fees

    • Annual fee. For remaining a cardholder. This is the cost you’ll pay every card year to own the card.
    • Balance transfer fee. For moving your existing credit card debt to your new card.
    • Cash advance fee. For using your card to collect cash.
    • Foreign transaction fee. For using your card outside the US.
    • Late payment fee. For paying at least your minimum after your statement due date.
    • Overlimit fee. For making a transaction that exceeds your credit limit.
    • Returned payment fee. For sending a payment that bounces — for instance, if you enter your checking account number incorrectly.
    • Returned check fee. For paying with a check that’s returned due to insufficient funds or a closed account.
    • Minimum payment requirement. While not exactly a credit card fee, some merchants have minimum purchase requirements if you want to use your credit card.

    Pay attention to the fine print associated with these fees. Failure to do so is how many consumers fall into credit card “traps” and pay the price when it comes to credit health.

    Balance transfer

    When you initiate a balance transfer, you move your existing credit card debt to a new card. Any debt you move will be subject to your new card’s balance transfer APR.

    Some cards come with an introductory balance transfer rate. With this intro rate, you’ll get a lower APR on your transfer for a specified amount of time, after which your APR reverts to the usual balance transfer rate. To avoid accruing interest, pay off your balances before your intro APR expires.

    Balance transfers usually come with fees — typically a flat rate or a percentage of each transfer, whichever is the higher fee. Also, they might not be subject to the grace periods you get with purchases.

    Cash advance

    When you get a cash advance, you use your credit card to take out cash. For example, you might use your card at an ATM. Purchases like gambling chips, gift cards or traveler’s checks may be classified as cash advances.

    It’s a good idea to avoid cash advances because they tend to attract high APRs and fees. Also, they often don’t come with grace periods for interest.

    Credit utilization ratio

    Your credit utilization ratio is how much you owe on your credit cards compared with your total credit limits.

    For example:

    1. Say you have three credit cards with different credit limits: $1,000, $2,000 and $3,000. This means you have $6,000 in total credit.
    2. You carry a $1,000 balance on your first card and a $2,000 balance on your second card. You carry no balance on your third card. In total, you carry a $3,000 balance across all of your cards.
    3. Overall, you have a $3,000 balance and $6,000 in total credit. So your credit utilization is $3,000 divided by $6,000 — or 50%. If you had a $2,000 total balance, your credit utilization would be $2,000 divided by $6,000 — or 33%. And so on.

    Your credit utilization factors heavily into your credit score. It’s a good idea to keep it below 30% at all times.

    Issuers vs. networks

    A credit card is offered by a bank — Bank of America, for example. But if that’s so, why does your card include a logo for Visa or Mastercard?

    It’s because credit cards are supported by both issuers and networks.

    • An issuer is a bank or credit union that distributes credit cards. You borrow money from your issuer when you swipe your card. Examples of issuers include Bank of America, Citibank, Chase and the State Department Federal Credit Union.
    • A network is a company that processes credit card transactions. The biggest American card networks are Visa, Mastercard, American Express and Discover. In fact, your credit card numbers are directly related to your card network.

    Your issuer is the one you’ll make payments to and call if you have problems with your card. You’ll probably contact your card network more infrequently — for example, when you want to take advantage of benefits such as Visa Concierge or Mastercard roadside assistance.

    Read our guide to learn more about credit card issuers and networks.

    Credit cards and credit scores

    When you apply for credit from a lender — for a mortgage, car loan or credit card — your credit score matters. Your credit score is a numeric measure of how trustworthy you are as a borrower.

    Lenders check your credit score to gauge their chances of being repaid. Here’s a simple rule of thumb: The higher your credit score, the more likely you’ll be approved for a credit card. Many organizations calculate credit scores, but the go-to source is a company called FICO.

    Use recommended credit scores for cards to help you determine which credit card best fits your financial situation. A few important factors that affect your credit score and your approval odds are:

    • Credit utilization ratio. This is the amount of credit you’re using relative to your total available credit. Lenders want to see low credit utilization — it implies you manage debt responsibly and are unlikely to default on your payments.
    • Payment history. One of the best ways lenders can predict whether you’ll make payments on time is to check whether you’ve already been doing so with other debt.
    • Length of credit history. Card providers can more accurately predict how reliably you’ll make payments if you have a long credit history.

    How does a credit card affect your credit score?

    When you apply for a credit card, your provider will check your credit in a hard pull. This will typically lower your credit score by a few points. But this is usually not too much to worry about, as you can regain those points within a relatively short period of time.

    Having a credit card can impact your credit score in bigger ways. Two of the most important factors here are your record of making card payments on time and how much debt you carry on your cards.

    What’s the range of FICO scores?

    The lowest FICO score is 300, while the highest is 850. The higher your score, the more trustworthy a borrower you appear to a lender.

    Depending on your score, you’re said to have excellent, good, fair or poor credit:

    • Excellent — 740 to 850
    • Good — 670 to 739
    • Fair — 580 to 669
    • Poor — 300 to 579

    You’ll qualify for different credit cards depending on your credit score.

    What types of credit cards are suitable for beginners?

    These types of products are excellent picks for a first-time credit card:

    • No-annual-fee cards.
      While you’re learning the ropes of credit cards, it’s helpful not to have to pay an annual fee. Use your card as much or as little as you want, without paying to maintain it.
    • Secured cards.
      This is a strong option if you don’t have a credit score yet. Because you must put down a security deposit, more lenders will be willing to accept you as a customer. As you slowly build your credit score, you can apply for better cards.
    • Student cards.
      An excellent choice if you’re currently enrolled in college. Providers are often willing to approve you even if you’re new to credit.

    Do I need a credit card?

    It’s natural to be nervous to apply for a credit card. The truth is, there are advantages to getting a card as well as situations in which you shouldn’t get one. Here are a few arguments for both, but you can check out our full guide on when to apply if you need more help.

    When you should get a credit card

    Here are a few reasons it might be advantageous to get a credit card:

    • Build or rebuild your credit. A credit card isn’t the only way to build credit, but it’s an excellent choice. When you use your card and consistently pay your bills on time, your credit score will increase. It’s a great idea to start as soon as you feel ready to build credit.
    • It’s a more convenient way to pay. Instead of carrying a lot of cash or writing checks, you can simply swipe your card.
    • Make a large purchase and pay it off over time. If this is your primary reason for getting a credit card, consider whether the purchase is essential. Also, make sure you can pay off your purchase in good time.
    • Earn rewards. As you spend with your credit card, you may earn cash back that you can redeem for bank deposits or statement credit. Or you may earn points or miles that you can redeem for travel, gift cards and more.
    • Make safer payments. With a credit card, money leaves your bank account only when you pay your statement. Because of this, a credit card could be more secure than debit cards. With a debit card, money is deducted from your account right away.

    When you shouldn’t get a credit card

    Consider holding off on a credit card if you:

    • Have difficulty controlling spending. If you habitually overspend, consider holding off on a credit card. You may rack up huge amounts of debt that will be difficult to repay. Work on solving your spending problem, or stick to debit cards.
    • Can’t pay larger amounts toward your monthly balances. The longer you carry a balance, the more interest you’ll accumulate. Interest can be surprisingly expensive in the long run.
    • Don’t have the right credit score. Find out your credit score before applying for a card — it’s certainly no fun getting denied. Also, applying for many cards can significantly affect your credit score.

    What is the cost of owning a credit card?

    Owning a credit card isn’t always free. There are several costs to watch out for, from the well-advertised to the non-obvious.

    • Fees.
      The annual fee is typically the cost you see first. It commonly ranges from $0 to $550, but it can reach the $1,000 range and beyond. You’ll also want to avoid foreign transaction fees, cash advance fees, overlimit fees and the like.
    • Interest.
      If you don’t pay off your balance by the end of your card’s grace period, you’ll start accruing interest. Interest can snowball faster than you think, so consider paying your bill in full each billing cycle.
    • Changes to your credit score.
      If you keep high balances on your credit cards — or, worse, miss payments — your credit score will drop. This, in turn, will result in higher interest rates when you’re ready to apply for loans. Over the long run, this can cost a lot.

    How to negotiate lower interest rates on credit cards

    Negotiating with your card provider for a lower APR can result in a big financial win for you. Plus, there isn’t really a downside to making the request, as the worst that can happen is you’ll get a “No.”

    Here are a few tips to help you navigate your negotiation smoothly.

    Know your credit score

    Your credit score is important because it affects whether your card provider sees you as a responsible borrower. The higher your credit score, the better chances you have of getting your APR lowered.

    There are many services that let you check your FICO score. Some, such as Discover Scorecard, let you check your score for free. Some credit card providers include your FICO score on your card statements.

    If your credit score is below 670, you may want to work on it before asking for a rate decrease. The two main ways to increase your score are making on-time debt payments over a long period and keeping your credit utilization low<.>Find credit card offers from other providers
    You can get prequalified for credit cards from certain providers without affecting your credit score. If you’re getting credit card offers in the mail, save them.

    Getting credit card offers means you fit the credit profile of someone who would likely be approved. It also means you have other options if you become unhappy with your current provider. Simply mention to your provider that you’ve received these offers, which will help you negotiate a rate decrease.

    Prepare for your call

    Before you call your provider, prepare a few talking points. In addition to having a strong credit score and getting prequalified for other cards, here are a few other factors that can help your case:

    • You’ve been a customer for a long time.
    • You have a significant history of on-time payments.
    • You recently got a raise.

    Ultimately, getting your APR lowered is often as simple as calling your provider, saying you’re seeking a rate decrease and explaining why you should get one.

    Be respectful when speaking to your provider

    When you call your provider, it helps to be kind to the representative — they may be more willing to do you a favor simply because you’re polite.

    If the representative says no, consider asking to speak with a manager, who may have more authority to help you. Alternatively, call back and try your luck with another representative who might be more lenient.

    How to choose a credit card

    With so many credit cards on the market, there’s no “perfect” card. Here are a few factors to compare to help you decide.

    Comparing credit card factors


    Consider whether you’re willing to pay an annual fee for your card. If you’re not, there are plenty of no-annual-fee products to choose from.

    Also, consider the things you’re likely to do with your card, and avoid the corresponding fees. For example, if you’ll use your card internationally, look for a product with no foreign transaction fees.

    If you’ll initiate a balance transfer on your card, you might like a product that waives transfer fees.


    Before applying for a card, check its pricing and terms. There, you’ll find the interest rates you’ll pay for various transaction types. The APR is especially important if you plan on carrying a balance from month to month.


    Check if the card’s bonus rewards match with your typical spending. If you’re a foodie, for example, you might like a card that offers accelerated rewards on dining purchases.

    If your supermarket bills are substantial, look for a card with the best rewards on groceries.

    If you spend relatively evenly across many categories, you might like a card with flat-rate rewards.


    Particularly if your card has an annual fee, there will likely be benefits you can enjoy. The best travel cards often have perks like travel credits, airport lounge access and hotel status upgrades.

    Your financial situation

    It’s best to get a credit card only if you have your finances in order. If you have structural financial problems like chronic overspending, a credit card won’t help — instead, it could make things worse.

    It’s easy to rack up large balances on credit cards, especially because most cards don’t require you to pay your bill in full each month. Paying the minimum each month is a particularly good way to find yourself deep in debt.

    Beyond considering whether you can spend responsibly, think about how a card can help you reach your financial goals. Maybe you need to make a big purchase and pay it off over time. In that case, a 0% APR card could be a better choice. If you need to escape from high interest rates on your current card, you could apply for a balance transfer card.

    Your credit history

    Your credit history will largely determine which credit cards you’ll qualify for. The higher your credit score, the more choices you’ll have.

    If you have a good or excellent credit score of 680 or higher, you could qualify for rewards cards, often considered the best credit cards available.

    It will be tougher to get a credit card with fair credit, but you do have options. However, it’s unlikely that you’ll get a card that offers rewards.

    If you have poor credit, most cards will be out of reach. Consider using a credit-building secured credit card.

    Your age

    If you’re young, you probably don’t have much of a credit history. Consider starting with a student credit card or secured credit card. Both cards can help you learn how to use credit responsibly.

    The older you are, the more likely you are to have a credit history. Check your credit score and apply for the cards that you have a good chance of being approved for.

    Here’s more information on credit cards for teens under 18 years old.

    Your income

    Income is a significant factor when a card provider decides whether to approve you. The reason is simple: Your provider wants to know you have the ability to repay your debt. All else being equal, the higher your income, the more likely your provider is to approve you.

    You don’t necessarily have to be employed to get a credit card. As long as you have some source of income, you’re eligible.

    Your personal interests

    Find a card that complements your interests. For example, if you like staying at a certain hotel chain, get a card that rewards you for spending money there.

    You’ll also find brand-specific cards. If you like football, for example, you could get the NFL Extra Points Credit Card. Wherever you like to spend money — whether it’s Disneyland, Hot Topic, Costco or Southwest Airlines — see if there’s a card that fits your interests.

    How to apply for your first credit card

    When you apply for a credit card, your card provider may need copies of your latest pay stubs to verify your income. They may also ask for documents to verify your identity.

    While most providers require you to apply for a credit card in your own name, some will let you apply for a joint account with a partner. If you want to give others access to your account, add them as authorized users.

    You can apply for a credit card online using the following steps.

    1. Identify your credit score. Your credit score is a measure of your credit history and plays a large role in whether an issuer will decide to offer you a particular card. If the credit card you want requires an excellent credit score and your score rests in the fair range, look for another card that’s obtainable in your credit score range.
    2. Compare credit cards. Start by thinking about what you want a credit card for and then consider the different features, rates and fees that are available on different cards. In the process, consider a few additional factors that can help you slim down your selection.
    3. Fill out the credit card online application form. Once you’ve found the card you want, locate the secure online application and supply the required information by providing a range of personal and financial details. This process usually takes around 10 to 20 minutes.
    4. Review your application. After you’ve completed the online application form, you’ll get a summary of all the details you’ve provided. Check that all the information is accurate before you complete the application. In some cases, reviewing these details could be the difference between getting approved or declined.
    5. Submit the application. Once you’ve confirmed your information, submit your application. You should get a response in within a few minutes, but sometimes it will take longer to review your information.

    Consider getting preapproved before applying

    Some banks will let you check for preapproval when applying for cards. To check for preapproval, you’ll need to submit a few details such as your Social Security number.

    Besides letting you know whether you’re likely to be approved for a card, preapproval doesn’t result in a hard pull on your credit score. These “soft pulls” can prevent the standard dips in your credit score caused by a standard credit card application.

    Common eligibility requirements for most credit cards

    • Minimum income. This is how much you need to earn every year to be eligible for a card. Overall income requirements vary by providers — for example, American Express tends to require higher incomes for approval. But you may be able to gauge your chances by calculating your debt-to-income ratio.
    • Age. To be approved for nearly all credit cards, you must be at least 18 years old.
    • Residential status. You must be a US citizen or permanent US resident. Some financial institutions offer credit cards to applicants with student or temporary resident visas.
    • Good credit history. Typically, you must have good credit and no active defaults to be eligible for a card. If you haven’t yet established a credit history, you may only be eligible for a low credit limit. By using your card responsibly, you’ll build your credit until eventually, you can apply for a limit increase.

    Typical documents or required information for applying

    • Personal information. This includes your name and date of birth.
    • Contact details. You’ll be asked for your email address, phone number and residential address.
    • Citizenship status and Social Security number. If you don’t have a Social Security number, you may be able to use an Individual Taxpayer Identification Number (ITIN) instead. Get an ITIN through the IRS.
    • Financial information. Your employment status, annual income, and monthly rent or mortgage payment. Sometimes, you’ll need to provide copies of your most recent pay stubs to prove your income. If you’re self-employed, you may need to provide your tax return.

    Other ways to get a credit card

    Applying online has many benefits — it’s fast, convenient and you can do it from the comfort of your home. But if you feel like applying online is a complicated process, you have other options:

    • Apply in person. Visit a bank or a credit union branch, or a store if you’re applying for a store card, and talk to the credit card representative. They will guide you through the process. This is also a fast way to apply if you have the necessary documents with you. The only drawback is that you have limited options to choose from.
    • Apply by phone. Another option is to call the bank or the credit union and apply by phone. The process is similar to applying in person, except you can do it from anywhere. Butt make sure to have the necessary information required to apply, such as your Social Security number, income, expenses and employer information.
    • Apply by mail. Another option is to gather all the information and mail it to your bank or credit union. This is the least preferable method because it takes longer for the mail to physically arrive to the bank. And then there’s the possibility of losing the documents in transit.

    What happens after I apply for a credit card?

    In some cases, you’ll receive immediate approval. If your provider needs to review your application, wait two weeks to hear back. If you still haven’t heard from your bank after that time, contact a representative and ask about your application.

    Upon approval, look for your card in the mail within seven to 10 business days. Then follow the enclosed instructions to activate your card.

    Congratulations — you’re ready to start using your first credit card!

    Reasons your credit card application may be declined

    Understanding the different reasons your credit card application may be rejected can help you figure out your next steps. Having bad credit isn’t always the cause for a credit card rejection. Some of the most common problems include:

    • Your age. If you are under 18 years of age then your credit card application will be declined.
    • Incorrect information on your application. Something as simple as incorrectly entering your driver’s license number or misspelling your residential address could mean the credit card issuer is unable to verify your details and move forward with the application process. If a mistake is the reason your credit card application is declined, you may be able to resolve the situation with the issuer by amending your application.
    • Recent changes in your circumstances. If you’ve recently moved or changed jobs and you haven’t updated this information across all your networks, it could be hard for the issuer to verify your identity or access your credit report. As with mistakes on the application, you may be able to fix this by calling the credit card issuer and/or by providing additional documentation.
    • Not meeting income requirements for the card. Many credit cards have minimum income requirements. If your annual earnings are less than this amount, you’re application will be declined.
    • Poor employment circumstances. Stable, ongoing employment helps show issuers that you can meet repayments for a new credit card. So if your employment is temporary, casual, part-time or hard to verify for another reason, you may find it hard to get approval for certain cards.
    • Other financial risks. When you apply for a credit card, you have to enter information about your income and expenses. If you have a lot of expenses compared to your income, the issuer may determine that there is a high risk you won’t be able to meet repayments and decline your application.
    • Not meeting citizenship or residency status. While there are some credit cards available for temporary residents, other cards are only available for permanent residents and citizens of your respective country. So your application could be rejected if you don’t meet these requirements for a particular card.
    • Bad credit history or “adverse bureau” information. When you apply for a credit card, the issuer will request a copy of your credit file from a credit reporting agency. If you have negative or “adverse bureau” information in your credit history – such as late payments, defaults, too many applications for credit or even not enough credit history – the issuer may find you do not meet the requirements for the card and decline your application.


    It’s important to remember that credit card issuers assess applications on an individual basis, so the specific reasons your application may be declined will vary depending on the circumstances. Some issuers may be willing to discuss these details with you through a reconsideration line but others may not. Either way, it’s a good idea to keep a copy of your application and go over all the details above to figure out why it was declined.

    What is statement credit?

    A statement credit is money your provider pays to your credit card. It essentially works the same as a cash payment to your account.

    For example, if you have a credit card balance of $1,000 and you receive a $100 statement credit, you’ll then owe only $900.

    When your provider applies a statement credit to your account, you’ll see it in the transaction history in your online account. You’ll also see it on your monthly credit card statement.

    How might you receive statement credit?

    There are different ways you receive statement credit. The three major methods are rewards redemption, reimbursement for travel purchases and credits for item returns.

    Redeem your rewards as statement credit

    Typically, you’ll have a few ways to redeem your cash back, points or miles. You might be able to trade your cash back for a nice deposit into your bank account, or use the points for something like a hotel getaway.

    Sometimes, you can redeem your rewards in the form of statement credit. For example, you might normally trade your cash back for a bank deposit, then pay off your credit card with that money. Instead, simply redeem your cash back as statement credit and lower your card balance directly.

    Points or miles can work the same way. Instead of redeeming them for travel, you may be able to use them for statement credits. But remember this might not always be optimal, because your rewards might be worth lower than they would if you used them for other redemptions.

    Pro tip

    The standard value for points or miles is 1 cent each. For example, if you have 50,000 points, they should be good for a redemption worth $500.

    However, if you redeem these points for statement credit, they might be worth a lower value — $300, perhaps. This gives you a value of 0.6 cents each, which is a poor deal.

    The lesson: Always calculate the potential value of your points or miles before redeeming them. Do this by dividing the value of the redemption by how many points or miles you must use. So, a $300 flight that costs 25,000 points yields a $300/25,000 = 1.2 cent-per-point redemption rate.

    Get reimbursed for travel purchases

    There are a variety of cards that offer statement credits for travel purchases. Here are a few examples of statement credits you might find:

    • General travel credits.
      These are some of the most powerful travel credits, as they’re often good for wide-ranging travel purchases such as flights, hotels, car rentals and more.
    • General airline credits.
      You’ll be reimbursed for eligible spending at specified airlines such as checked baggage fees and in-flight purchases.
    • Dining credits.
      You’ll be reimbursed when you use your card at restaurants, food delivery apps and more.

    A provider may offer reimbursement for a specific purchase. Here’s a common example: Pay for your Global Entry/TSA PreCheck application fee with an eligible card, then get reimbursed later.

    • Hotel credits.
      Some hotel cards will help you erase your purchases when you spend at certain hotels.
    • Airline credits.
      Some cobranded airline cards offer savings on in-flight purchases, which you’ll receive via statement credits.

    Receive credits for returned items

    If you buy an item with your credit card and later return it, you’ll usually receive your refund to that same card. Your initial purchase resulted in an increase to your card balance — with a return, your balance will decrease.

    Keep in mind you could still accrue interest on a purchase even after you’ve initiated your refund. That’s because refunds can take up to seven days to fully process.

    How long do credit cards last?

    There’s no penalty for keeping a credit card for a long period of time, even if you aren’t actively using the credit card. In fact, closing a credit card you own can do more to hurt your credit score than help. Even an unused credit card contributes to your credit utilization – getting rid of that unused card can result in a sudden boost to your utilization score.

    With that said, there are a few reasons you might want to cancel an existing credit card:

    • The card has an annual fee. If a credit card you own has an annual fee but you rarely use the card for purchases, you might consider canceling that card to avoid paying needless fees.
    • You have too many cards. If you find yourself unable to juggle a large number of credit cards that you might have accrued over time, you might consider canceling a few. Better to ease your mental financial load than to accidentally miss payments or other credit card fees you’ve forgotten about.
    • You want to upgrade. Sometimes, you simply want to replace an existing credit card with a better one. If you aren’t changing products within the same issuer, you’ll probably want to cancel the outdated card that you’re replacing. Consider balancing your payments and spending on the new card before canceling to help stabilize your utilization.

    Bottom line

    It’s a great feeling when you finally get your first credit card. When you do, resolve to build good financial habits.

    Keep your spending in check, pay off your balance in full each month and avoid some other credit card mistakes. These are the keys to using a credit card like a pro, building your credit score and opening new financial opportunities.

    If you still have questions about credit cards, reach out to us using the form at the bottom of this page. A member of our team will be in touch.

    Frequently asked questions

    What are the best credit cards?

    We’ve assembled a list of what we consider the best credit cards for you to review.

    Do I have to pay an annual fee for a credit card?

    No, you can find many no-annual-fee credit cards to compare. Note that these cards typically don’t offer the powerful rewards you’ll get from cards with annual fees.

    How long does it take to be approved for a credit card?

    Many providers offer instant conditional approval online. If a provider needs to consider your application further, it may take up to two weeks to receive a response.

    Can you have two credit cards from the same bank?

    Yes. Most banks will let you apply for more than one credit card, though some restrictions can apply.

    More guides on Finder

    Ask a Question provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

    By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use.

    Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.

    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

    8 Responses

      Default Gravatar
      DaveSeptember 5, 2018

      How do I top up my credit card ?

        JhezelynSeptember 6, 2018Finder

        Hello Dave,

        Thank you for your comment.

        Please note that a credit card does not have money on it that you pre-pay. It connects to a line of credit, so when as you use the card for payment, the credit card company pays for it and then you pay them back. You may be talking about a prepaid card if you mean topping up your card.

        Should you wish to have real-time answers to your questions, try our chat box on the lower right corner of our page.


      Default Gravatar
      DaveSeptember 5, 2018

      My business partner wants to send you money using a credit card. How can he/she do that?

        JhezelynSeptember 6, 2018Finder

        Hello Dave,

        Thank you for your comment.

        If your business partner wants to send you money using a credit card, there are some ways to do it. Bank transfer, wire transfer, and money transfer services can help her/him do that. You may refer to our guide on how to send money. There may be factors that need to be considered when sending money. Like the fees, the currency, and other rates.

        To send money, visit the website of the transfer service and start the process of sending the money.

        Should you wish to have real-time answers to your questions, try our chatbox on the lower right corner of our page.


      Default Gravatar
      SandyOctober 20, 2017

      I have an American Express platinum card. The yearly fee is now $550. I have had this card for over 10 years paying it off entirely each month. No balance. If I cancel this card because of the fee will it affect my credit score?

        JhezelynOctober 21, 2017Finder

        Hi Sandy,

        Thank you for your comment.

        The amount of time your credit card has been open affects your credit score, and is beneficial if you have a positive credit history. So closing that credit card you’ve had can actually hurt your score if you have a positive payment history. Know more about credit card cancellation and everything that goes with it.

        I hope this helps.


      Default Gravatar
      ChrisOctober 5, 2017

      Will I have a monthly payment even if I don’t use the card that month?

        JoanneOctober 8, 2017Finder

        Hi Chris,

        Thanks for reaching out.
        Provided that you have zero outstanding balance on you credit card, you should get zero interest. However, with regard to the fees, that would depend on the agreement you have with your bank. To be on the safe side, the best option would be to call the phone number at the back of your credit card.


    Go to site