NEW YORK — Shopping for a credit card is a lot more complicated than it used to be.
That might be a tough pill to swallow if your terms were unfavorably tweaked in the past year and you’re itching to take your business elsewhere. You may find other banks aren’t clamoring to steal you away.
If you don’t believe it, just check your mail. This year, the number of credit card offers sent to households is forecast to sink 60 percent to 1.5 billion, after falling 71 percent last year, according to market research firm Synovate.
Still, it’s best to do your homework before rashly closing an account or trying to open a new one. Here’s some advice:
Know where you stand
To size up your desirability as a customer, start by checking your credit report.
You’re entitled to one free report a year from each of the credit bureaus, Equifax, Experian and TransUnion (go to www.annualcreditreport.com to get started). If your report lists any collections, you can bet your score won’t be great.
Your report won’t give your actual score, however; you need to pay $10 or more for that, depending on the agency. Or you can go to myFico.com and pay $15.95, which also gets you access to a calculator that lets you see how actions, such as paying off a debt, would improve your score.
If you don’t want to pay, you can take a quiz at CreditCards.com to get an estimate of the range you might fall into. Of course, the results might be off significantly since the 10 questions are broad, and you may inadvertently misreport your credit history.
Regardless of which path you choose, your score will generally fall into the categories of excellent (750 or higher), good (660 to 749), fair (620 to 659) and poor (350 to 619).
Getting a new card shouldn’t be a problem for anyone with excellent credit. If your credit is fair to good, you can probably get approved for a major bank card, but your interest rate might be as much as 8 percentage points higher than someone with excellent credit. For example, you might be charged a 20 percent APR, instead of 12 percent.
Weigh the repercussions
Before you apply, consider whether you might also be seeking a mortgage or car loan in the next year.
Applying for a new card can shave a few points off your score, since it generally gets dinged when your report reflects that you’ve sought additional credit.
The same is true if you open a new card, since the new account will bring down the average length of your credit history. Just how much your score is hurt will vary depending on your overall profile. The negative impact usually disappears after about a year.
For the near term, however, a difference of just a few points could end up costing you, or determining whether you even qualify for a loan.
“Particularly for a mortgage, every single point is going to count,” said Greg McBride, an analyst with Bankrate.com, the consumer financial Web site.
For example, if your score drops from 700 to 690, it could mean the difference between a 4.76 percent or 4.93 percent interest rate on a mortgage. On a $300,000 loan, that would translate to an additional $30 a month.
For the same reasons, be careful about closing old accounts once you get a new one.
Determine needs
Once you determine that you’re ready for a new card, figure out what you want out of it.
If you’re prone to carrying a balance, for example, your top priority should be a low interest rate.
Also be on the lookout for balance transfer fees; many banks now charge up to 5 percent, instead of the 3 percent fees from a year ago, McBride said. Some banks are also removing the limits on those fees.
If you’re trying to budget, you might want to avoid rewards cards. They tend to have higher interest rates, and you might be inclined to spend more under the premise that you’re earning points.
If you pay off your bill every month, on the other hand, interest rates have no bearing on you and the world of rewards opens up. All you have to decide is whether you want cash back, merchandise or miles.
Cash back is generally the easiest to understand in terms of the value you’re getting, Woolsey said. You might also want to be wary of exchanging points for merchandise, since banks tend to inflate the required points.
For personalized recommendations on a card that suits you, you can punch in your information at www.BillShrink.com or www.Mint.com. You’ll need to provide bank and credit card account numbers for the latter option.
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