How to Apply for Your First Credit Card

Understanding Promotional Credit Card Rates

When you apply for a credit card, you might see that it has a promotional interest rate, also called an introductory rate or introductory annual percentage rate (APR). These rates can be pretty terrific -- as low as zero percent -- but make sure that you know everything you need to know about the rate before you sign up for the card. These rates are almost always temporary, and sometimes they only apply to some situations, such as special rates for balances you transfer from other cards that don't apply to purchases. Most credit card companies put the introductory APR at the top of the offer in bold print, while the information about the limitations of the offer is down below in fine print. This is a good time to remember what your parents always said about reading the fine print.

Something else you need to know before you apply for a new card is how long the promotional rate will last. Some last for six months, others for a year or longer. If the promotional rate is for balance transfers, calculate how much you would need to pay each month in order to pay off the balance transfer before the promotional rate runs out.

The third thing you really need to know about a promotional interest rate is what will happen after the promotional term is up. What will the interest rate rise to? This is especially important with "same-as-cash" promotions. If you buy that fully-loaded new laptop you've been coveting on a 12-month, same-as-cash deal, understand what the consequences will be if you don't pay off that laptop in 12 months. In most cases, the rate will jump astonishingly high, and the new rate will also reach back to the date of your purchase. Suddenly, instead of paying no interest on your new toy, you owe 29 percent interest from the day you took it home until the day you pay it off -- a terrible deal in the long run, and a very unpleasant shock when you open your next credit card statement. Many same-as-cash deals will also revert to the sky-high rate if you miss a payment or are late making a payment. Banks are able to offer these same-as-cash deals because they make so much money from the unfortunate souls who don't stick within the strict guidelines of the deal. Bottom line: Never sign up for a same-as-cash deal unless you're sure you can pay it off on time.