Benefits of Credit Cards for Low Income Earners
One of the biggest hurdle in getting a credit card is the income and credit score, in addition to other eligibility criteria. Each bank or financial institution has a minimum income criteria depending on the type of card applied.
For example; gold or platinum cards, require high income compared to classic card, simply because of the benefits offered. After all, high income earners are special customers for the card issuers and certainly they would expect greater benefits.
However for low income earners, the best credit card is the one that fits the lifestyle and ability to repay. It’s never a good idea to accept or apply for a card just because it was offered to you at the bank or mall, because it’s probably too expensive or doesn’t match what you need.
What are the benefits of a low income card?
The benefits of each card depend on the issuing bank, but some of the most common are:
Reward Points: Accumulate points for each purchase, which you can exchange for products and/or use to make any other payment. Benefits are offered by the banks and payment networks such as Mastercard and Visa. Discounts or promotions are offered at the time of making payment with the card.
No annual fee: Annual fee is an amount that the bank charges you for servicing the credit card. As the name implies, it comes into effect when the card renewal comes up after one year of usage. But many of the cards for low income earners do not charge any annual fee, to attract new customers.
No Joining fee: There are many cards that do not carry any joining fee, which is a fee charged when the card application is accepted. Although this fee is small, it is waived off for the cards requiring low income.
Cash back on timely payment: Companies like www.cred.club offers reward points and offers/discounts on online shopping, travel booking, buying movie tickets and many more. You can also get cashback when bill is paid via Amazon Pay.
Add-on Card: If low income earner uses the card honestly and maintains good credit history then they can apply for supplementary card for the family member (father, mother, wife, 18+ year old children) at no extra cost and is valid for entire life time. The benefits offered on add-on card are similar to that of the primary card. However the biggest benefit is that this card does not require income proof of the person for whom card is issued i.e. secondary card holder. At the same time, the secondary card owner can start building his/her credit history and will also understand how to use credit card wisely and how it helps to save money.
Free Insurance: Many of the cards for poor income individuals which typically covers loss of life or Permanent disability due to accident.
Cash Withdrawal: Cards can also be used for withdrawing cash at ATM. However remember that the charges for withdrawal are very high. So try as much as possible to not use the card at ATM.
Points to keep in mind before applying for cards requiring low income:
- Whether zero annual fee is subject to the use of the card. For example, there are banks that ask you to make one purchase a month to avoid annual fee.
- The validity of reward points.
- If the insurance offered by the cards has an additional cost.
- If in order to qualify for an joining promotion you have to make some kind of purchase with your card. For example, there are some card that ask you to spend certain amount of money to make the promotion valid (round flight, online discount, etc.).
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).