Questions you need to ask before accepting a credit card or online loan

May 12, 2017
Because of online applications and rapid acceptance, getting a personal loan or a credit card can seem quite easy. Especially when they need money quickly, people tend to overlook important information about these cards or loans. This is a mistake because this information can make a major difference to their personal finances.

No one really wants to comb through the fine print of a credit card agreement and figure out what it all means. You do not have to understand every word of the agreement, but here are some things to look for before you accept an online personal loan or credit card offer.

What is the interest rate?

The first thing to consider is how much it will cost to borrow the money or use your new card. Offers will sometimes be advertised as having an interest rate “from” a certain percentage (“from 7.9%,” for example). People with a perfect credit history may qualify for this rate, but most applicants will probably be offered a different rate that is not as attractive as the one that is advertised.

You may not learn about your specific interest rate until after you have applied, but it should be clear before you accept the online loan or credit card. It is worth spending the time to call the card or loan company to verify your rate if it is unclear.

What are the rewards points rules?

Many people choose a certain credit card because they want to get the rewards that it offers. Perhaps there is a bonus for new card members. For example, the card could promise “40,000 rewards points” to new members who pass a certain spending threshold.

Firstly, you need to be aware of what that spending minimum is. It could be quite high. You could be required to spend several thousand dollars over the course of a few months. You have to understand the requirements for earning rewards and then decide if you can realistically meet those requirements.

Another pitfall is getting a card that offers rewards for certain types of spending. A card may promise five points per dollar spent on airline tickets, for example, but only one point per dollar for other purchases. If you travel infrequently, this card is basically useless to you.

Actually, this example is quite common, especially with travel credit cards and cards associated with a specific airline. People fall for the hype quite easily. They dream about using their card and getting a free trip, but they do not realize that it will take years for them to earn enough points.

Would an online loan be more practical for me?

Online personal loans are often the best option for getting cash quickly. The interest rate is set, as long as you make payments on time. These loans do not come with perks like points or airline miles, but, as we have already discussed, these are often overrated and only lead to significant rewards if the cardholder is willing to spend a lot of money.

So, the only variable to be worried about when it comes to online personal loans is the interest rate. These loans are simpler, more straightforward and easier to manage. These qualities mean a lot when it comes to personal finance.