Are the easiest credit cards to get necessarily the worst credit cards on the market?

Credit card purveyors are creating credit cards based on benchmark user profiles. There are credits for consumers with little or no credit card history, for consumers with excellent credit, business owners, brand loyalty, etc. Sometimes the easiest credit cards to get approved for are from store loyalty brands; however, these usually come with very high-interest rates. But it is important to remember that credit cards basically provide interest-free loans, so if you can pay off the card within the grace period, the interest rate is inconsequential. The details matter! Read your disclosure and ask questions to the customer service department for your credit card.

Why aren't credit cards easier to get?

Credit card debt poses a default risk to the financial institution that fronts the debt. Effectively, they are using our credit scores and income levels to determine our ability to repay the debt and manage money. However, the reality is that ability and willingness don’t always mirror. So, financial institutions have to protect their interest and their shareholders’ interest to minimize potential defaults by consumers.

What advice do you have for someone who's having trouble getting a credit card?

Most people have trouble getting qualified for credit cards because they fail to do a proper search for the credit that best fits their credit profile. There are sites out there that do comparisons of credit cards. Many consumers are afraid of the search costs involved in the process of getting a new debt facility (credit card). Sometimes the focus is only on unsecured credit card debt. Starting with a secured card may be a good idea, especially if a consumer is trying to build credit.

Do you think credit cards will become easier or harder to get in the next 12 months?

The monetary response during COVID-19 has placed a tremendous amount of liquidity in the market place. The goal is to get lenders to spend. (Recall the US GDP is 70% consumer-driven.) However, recent job numbers suggest that people will need to meet the shortfall. Credit cards are usually the first debt facility to offset the shortfall. With millions of unemployment applications being filed, I think we’ll see a spike in consumer credit card debt. Financial institutions that provide credit cards will benefit significantly from consumers that revolve their debt. So, I believe they will find an innovative strategy to provide credit to consumers during this time.

 

This was originally featured on WalletHub's "Ask The Experts" section. To read the full article, visit https://wallethub.com/easiest-credit-card-to-get#experts=Terrance_Kieron_Martin.

View more expert advice from Dr. Martin about personal loans here.