Christmas is coming and you may be thinking about spreading the cost by shopping with your credit card and paying the money back in manageable instalments. But if this is your plan, when’s the best time to apply?
Well, if you’ve heard there’s a particular time of the year or month that’s best to apply for a credit card, we’re here to tell you this is a myth. In fact, the right time to apply for a credit card all depends on you.
Find out more below:
Can you afford it?
If you’re thinking of applying for a credit card and wondering if the time to do so is right, the first thing to ask yourself is if you can afford it.
A credit card lets you borrow what you need to cover your purchase, whether you’re spending online or in-store. But you pay for this – in interest.
If you clear your monthly credit card bill in full when you receive your monthly statement, you won’t be charged interest. This means that you’ll only pay back what you’ve spent and no more. This is the cheapest way to use a credit card.
But you may not be able to afford this, particularly if you’ve used your credit card to make an expensive one-off purchase that you couldn’t otherwise afford to pay for in one go – like your Christmas shopping, for example.
"Pay off as much as you can each month."
Well you can pay off your balance in monthly instalments, but it’s still a good idea to pay off as much as you can each month. This way you’ll pay back what you owe faster and will save money on interest.
At the very least, you must make your monthly minimum credit card payment. This is agreed with your lender when you take out the card and it’s very important you pay it.
If you miss your minimum payment, your lender could charge you and cancel any special promotional deals you were enjoying. And on top of this, your credit history will be damaged, which will mean it’s harder to borrow in the future.
So, being able to afford your monthly bill is one of the factors that will help you work out whether now is the best time for you to apply for a credit card.
Do you qualify?
We mentioned credit history before, but what is this? Well, it’s a record of all your borrowing and other financial agreements going back over the last six years, along with some of your personal details. It’s what lenders look at to work out what type of borrower you are.
For example, if you’ve ever taken out a credit card or loan or had a mortgage, this will be listed on your credit history. Similarly, if you’ve ever been the subject of a formal debt solution, like bankruptcy, this will also show.
As well as the financial agreements you’ve made, how well you’ve managed them is also included in your credit history. If you always make your payments on time, this will show. If you have missed payments or been late with them, this will also show.
"Lenders see if you can be trusted to manage the credit you have."
When you apply to start a new credit agreement, the lender will take a look at your credit history. They’ll consider whether you already have what they think of as too much credit available to you, and whether you’ve shown that you can be trusted to manage the credit you have.
If they see that you’re managing all your current agreements comfortably and aren’t over-burdened with borrowing, this should stand in your favour. But if the lender can see that you regularly miss payments and are struggling to juggle what you have, you may be turned down.
You can find out more about your credit history and how to improve it here.
Is it the right time?
So, if you can comfortably manage to clear a big chunk of your credit card bill in full each month, and you’ve had no trouble with managing credit in the past, now could well be the right time to apply for a credit card.
And if you can’t say this right now? Well, it’s probably worth waiting a little longer until you know you can afford your credit card bill, or until you’ve improved your credit history, before you apply. Not only will this boost your chances of being accepted, but it also means you’ll get the most from your credit card.
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