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Since credit cards are a great tool for making big purchases and paying them off over an extended period of time, it is a wise decision to get one. Also if you are new to credit, a credit card can be quite helpful in building a good credit profile. Many a times, you would be contacted by the banks that are eager to offer you credit cards but if you are applying for one on your own, you must understand the requirements and the eligibility criteria. Choosing the right credit card is also one of the common challenges that first-timers face. So you must shop around and compare before applying for a credit card.
Here we will talk about the basic requirements for getting a credit card in India-
1- Income and Job Stability
There is a lot of information that you need to provide at the time of filling a credit card application form. Income is the most important of all as it determines your repayment capacity. The bank would also like to make sure that you have a stable job and would not default on the loan in future. This is the reason why they ask you to furnish your employment details such as name and address of your employer, duration of your employment, etc.
For example, a person who earns Rs. 50,000 per month and has been employed with his current company for 3 months has less chances of approval than another applicant who earns Rs. 35,000 a month but has been working for 1.5 years with the current organization. As a proof of your income, you will be asked to submit the latest salary slips, ITR, etc.
Most of the banks have mentioned the income criteria for different credit card offerings. For instance, when you want to apply for SBI Cards online, you can visit their website and enter some of your basic details to check the eligibility for a particular card.
2- Credit Score and Credit History
Credit profile of the applicant is another important factor that affects the chances of credit card approval. One must have credit score of 700 or more to be eligible for a credit card. In order to maintain a good credit score, you must pay all your dues on time- be it a credit card or personal loan or any other type of loan. The bank would like to know whether you service all your EMIs regularly or if you have defaulted on some loans in future. All this is reflected in your credit history which is prepared by credit bureaus like CIBIL, Experian and Equifax.
So, before applying for a credit card, you must check your credit score to make sure it is above the acceptable level. However, if you are new to credit, you would not need to check this. Those who do not have a credit score are usually eligible for credit cards. Banks offer basic credit cards with comparatively lower limits to such applicants. For newbies, credit card can be a great tool for building credit from the scratch.
3- Existing Relationship with the Bank
It is relatively easier for an applicant to get approved for credit cards if he/she already has a savings account or fixed deposit account with the bank. On top of this, you should have also maintained a good banking behaviour with them say you maintain the minimum balance requirement, do not get overdraft and service your loans regularly. When the bank has been watching your financial behaviour over a long time and is satisfied with it, getting a credit card becomes relatively easier. This is especially helpful for those who are trying to get their first credit card.
4- Secured vs. Unsecured Credit Cards
Credit cards are mostly unsecured but when someone is not able to get a credit card due to bad credit history, banks offer them the option of secured credit cards. These are secured against a fixed deposit and work in a similar way as credit cards. It is beneficial for those who already have a fixed deposit with the bank.
However, some banks also provide the option of ‘instant credit cards’ when you open a fixed deposit account with them.
The bank will set the credit limit on your card based on the quantum of your fixed deposit. For example, if you have opened an FD of Rs. 50,000, the bank might be willing to give you a limit of Rs. 30,000. In case you default on the payment for a long time, the bank may choose to recover the debt with your fixed deposit.
5- Free Credit Card vs. Joining Fee Credit Card
Banks offer lifetime free credit cards as well as cards with annual fees/joining fees. Usually, free credit cards come with basic benefits and as the privileges increase so do the annual fees. First-time credit card users are advised to get free credit cards as the uses would be relatively basic but for those who have put major expenses on their credit cards, premium ones are better as they would offer numerous benefits. For example, a free credit card by HDFC Bank offers generic benefits like reward earnings, etc. but those with high annual fees come with features like airport lounge access, milestone benefits, free movie tickets and much more. You can start with a basic credit card and upgrade it later.
On a broader scale, the main requirement of getting a credit card is that you earn a regular income and can submit valid proofs of the same in addition to proof of identity and address. Banks just want to know whether you are in a financial condition to repay the amount.
Apart from these, you should also know the reason why you want to get a credit card and make the right choice. If you only need the card for making big-ticket purchases and nothing else, a card with travel benefits would not be of great help. So, you must shop around and learn about the benefits offered on different credit cards. Nowadays, a number of platforms are available like Paisabazaar.com where you can compare credit cards on the basis of annual fee, features, rewards and other benefits. Find the right credit card and apply online as online application is easier and more convenient.
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