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Key things to consider when applying for a credit card

Are you planning a holiday or do you need to buy a new sofa or bed? Using a credit card to pay for these purchases is a sensible choice, as it allows you to take advantage of the many deals and discounts on offer and then spread the repayment costs over several months. But, if you're confused by the vast array of credit cards available, pause for a second and read our key things to consider before making your credit card application.

Spending habits

Do you put every small purchase like petrol or groceries on your credit card? Or do you use it only for emergencies and large purchases like holidays and flights? Try to get an accurate picture of the kind of credit card user you are before you commit to a credit card. Being honest and realistic about your spending habits is crucial. If you aren't the sort of person who pays off their full balance monthly, then your priority should be cashback and rewards instead of a low annual rate of interest. Tailor the credit card you need to your spending habits.

Think long term

When you take out a credit card, the chances are that you’ll end up using it for a minimum of two years. Yet it is often the introductory offers that tempt us to choose a particular credit card. While a low introductory interest rate may be tempting, once the offer expires (usually after six or twelve months) the card may end up costing you more than you thought. Some credit card companies, like aqua, offer people who have poor credit credit cards and provide introductory rates that actually fall as you prove how well you will manage your account. The aqua Advance credit card, for example, provides customers with the control to reduce their interest rate simply by paying at least the minimum amount on time. The interest rate can be reduced from 34.9% Representative APR to 19.9% Representative APR. The interest rate drops by 5% a year for three years. So consider how the credit card will work for you in years two and three, not just for the first year.

Credit limit

Before the credit crunch, companies routinely offered high credit limits to almost every new customer. However, times have changed. Nowadays, most credit card providers will start customers off with a fairly low credit limit and increase it as their relationship strengthens. But the opposite is also the case – in the current climate, credit card companies can lower your credit rating dramatically, and with very little notice. That’s why it’s a good idea to always stay well below your credit limit. The aqua Classic credit card starts most customers on a credit limit of between £250 and £1,600. If you manage your account responsibly, the credit limit could be increased to £2,700 so you'll have plenty of scope for staying under your limit.

Fees and penalties

Make sure you read the fine print in the sign-up brochure and pay particular attention to notices about fees and penalties. These can significantly add to the cost of maintaining and using your credit card. For example, if you travel frequently and use your card when abroad, you could be paying a large foreign currency transaction fee without realising it. The aqua Classic credit card has no annual fee and a great online account management system so you'll always be able to keep up to date with your spending.