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How to benefit from new card offers

January 11, 2012

| Money Rates Columnist

If it seems like you're getting more credit card applications in the mail these days, you probably are. With fewer consumers defaulting on their credit cards, banks and card issuers are expected to broaden their search for new customers in 2012.

According to the Associated Press, people with moderate credit scores -- somewhere around the national average of 661 -- should find it easier to get credit approval in the coming months. The best credit cards will still be reserved for those with the best credit histories, but banks will still likely extend cards to a wider range of consumers in the coming year.

Americans making credit card payments again

Although banks were issuing credit cards to all sorts of borrowers five years ago, the Great Recession prompted many to pull back and focus exclusively on less risky credit card customers. With the default rate peaking just 18 months ago to more than 10 percent, banks had to write off as much as $75 billion in recent years, according to the AP.

The situation has improved dramatically recently. The number of people no longer making payments on outstanding credit card balances is expected to drop below 4 percent in 2012, and a recent survey by Principal Financial found that American workers' top financial goals for 2012 were to save more money and pay off credit card debt.

A flurry of new credit card offers expected

Credit-reporting agency TransUnion estimated in 2010 that more than 8 million consumers had stopped using credit cards since beginning of the last recession.

Now, with more American consumers taking their credit card bills seriously and paying off their bills in full each month, it's likely that banks and credit card companies will want to lure some of those departed customers back.

If you're one of those being inundated with credit card offers, here are a few steps to take before plunging back into the market:

  • Do your due diligence. Don't apply for a credit card that's out of your league. Every time you apply for credit, the inquiry made on your credit history dents your credit score. If you apply for too many cards intended for those with higher scores, your score may drop so low that you can't get even a less attractive card.
  • Shop and compare. When you get a mail offer, compare it online to other cards. You may find a lower interest rate, more rewards or a better APR teaser rate elsewhere.
  • Avoid retail store cards. They can hurt your credit score, even if you pay them off, and their usefulness is too limited to make them necessary.

As always, don't get in over your head. For some cards, you need to spend a certain amount in the first few months in order to earn the preferred rewards. But make sure you can pay the bill off monthly before you shoot for that target. If you end up having to pay interest, those rewards may not be worth it.

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