Readers of this site have posted various queries via E-mail or comments section. Many of the queries were related to credit cards. Most of these queries have been clubbed, listed below, along with the answers.
Here we go…
What are different types of credit cards available in India?
There are three types – secured (offered against security – fixed deposit) and unsecured (offered depending on income, credit score, employment, city, etc.). The third option to get card is a supplementary card offered to family member of the primary card holder with good credit score and repayment history.
Also, why is credit score taken into consideration?
Look at it this way. Would you ever lend money to your friend who, in the past, delayed the money owed to you. Won’t you instead lend money to someone who had made the repayment without any default? This is the same logic used by issuers to verify authentic applicants. They will gather all the historic credit (loan/credit card) repayment history, number of loans/cards applied/rejected/in-use. And based on that, credit score is calculated.
Secured card or unsecured card, which one should I choose?
If credit history is not good very few banks will approve the application. So for such individuals, cards against FD is the best option. However the limit on such cards depends on the FD amount kept with the bank and 85% of the amount is offered as the card limit. However if you need a high credit limit then unsecured card is the recommended solution.
Does having a card affects credit rating?
No. But having too many cards does affect the score.
How many cards I can own?
There is no definite answer. But remember that, having or applying for too many cards displays credit hungry behavior. So two cards are enough.
Income Related Queries
Why card issuers ask for income when applying for a unsecured card?
Income is the only proof to evaluate whether the applicant is credit worthy or not i.e. repayment capacity and decide on the credit limit. Higher the income, higher are the chances of approval and vice-versa. repayment capacity or not. Poor salary naturally indicates, the repayment capacity would be poor. So the risk is high.
What does annual income mean on a credit card application?
Whenever any individual applies for a unsecured credit card, issuer will ask for the annual income. Annual income for salaried employee means net income received via salary after all the deductions.
Is there any other way to get card when the applicant does not having any income source?
Yes – there are two options. Apply for secured card i.e. against fixed deposit. Fixed deposit is the only security accepted by banks in India. Another solution to get card is add-on card.
Can I lie about income while applying for credit card?
NEVER do this. You will get caught since issuer will ask for document showing your income. It’ ok to not have card then having a one which was bought fraudulently.
Can you get a credit card with no job and bad credit?
Yes. Credit card against fixed deposit is the best solution for such individuals. You need to open FD account and deposit a minimum amount and get card against it. You can also get card against existing FD. Another option is supplementary card. This way you can start building credit history or repair existing bad score by making timely repayment, in full and without crossing the credit limit.
I have low income, can I get credit card?
There are many banks in India offering credit card to people with poor income. For e.g.
- Visa Classic from Vijaya Bank requires annual income of Rs. 50,000 (i.e. monthly income of Rs. 4,167)
- India card and Visa Gold credit card offered by Bank of India requires applicant to have minimum annual income of Rs. 75,000 (i.e. monthly income of Rs. 6,250)
Can I include parents income on credit card application?
No. Applicant can get card based on his/her income.
Self Employed & Credit Card
How can self employed get credit card in India?
Self-employed individuals can get card through 3 ways – against FD, traditional card, and add-on card.
Does being self employed affect credit score?
No. Factors affecting credit score are – repayment history, number of credit applications made, card usage, etc.
What are the various income related document proof requested by the issuer?
Documents vary depending on the profession of the applicant.
For salaried individuals:
- Monthly pay slip for last 3 months
- Bank statement for last 6 months
- Income tax return for last 3 years
Note: Depending on the case, issuers may ask for other documents.
What if I provide fake documents and mention incorrect income?
Many times, when the income of applicant is low, he/she produces forged documents with inflated income or fake company address, etc. But this should NEVER be done. With evolving technologies and strict background check, it is now very easy for issuers to verify authenticity of the applicant. And, if caught, it can lead to legal case especially if you are a salaried professional. It is a criminal offence especially when you are a salaried employee since you are using official company document for personal benefit.
Producing fake document (salary slip, bank statement, etc.) may result in job loss and no experience or relieving letter will be provided due to termination of job. Also, future career prospects will be at risk. This is because if your employer files police complaint then getting a passport/renewing will become difficult, since police case is registered on your name. Also, future employer also verifies whether police records exist on the candidate’s name. So always remember, not having a credit card will not make you poor, but obtaining it through unethically will take you to the path of poor.
Quite often getting the queries answered related to credit card becomes difficult. And every individual has different set of queries related to it.
Should you have any queries related to credit card, mention it in the comment box below. And the same will be answered as early as possible.