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What Do Banks Consider Before Issuing A Credit Card?

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Viveka Rao
Written by Viveka Rao

 Credit Card Issuance: What Are The Steps Banks Follow?

How To Use Your Credit Card Smartly And Save MoneyMany people think that the process of acquiring a credit card is an elaborate and frustrating one. This is not so. Here are some facts to consider.

Credit cards are issued by credit card companies and banks based on certain important factors such as the following:

  • Income: Banks and credit card issuing companies consider your income as the most vital parameter, as it is the factor that indicates your capacity for repaying the monthly dues.
  • Existing account: Having a savings or salary account with a bank makes it easy to apply for the credit card. With proper accounts, very little overdrafts, a consistent minimum balance and money flow in your account you can speed up the process.
  • Credit history: If you are in possession of credit card already and want a second one, your credit history and CIBIL report will be checked by the bank to ensure your payments are regular and whether there are no outstanding dues.

First time ownership:

When you want to own a credit card for the first time without having credit history, for instance, if you are a fresh graduate on your first job or want to start a new business venture, how can you get a credit card?

Since the cards are issued based on the repayment capacity of the applicant, you may think that the lack of credit history is a big hurdle. Granted you can always use a debit card. But it will not help you build a credit score.

Fortunately, you need not worry about these things as you can get a credit card easily by two simple ways:

  • Secured card
  • Add on card

Secured method 

This type of credit card is issued based on the security provided by fixed deposit. Hence it is termed as secured card.

If you have set up a fixed deposit in the bank, based on the amount deposited you will be able to get a credit limit on the credit card provided.

For a fixed deposit amount of 50,000 INR, you will be given an equal amount of credit limit or an amount that ranges from 50 percent to 100 percent of the total amount deposited.

In India, ICICI, SBI Dena Bank and Axis Bank issue this easy to apply credit cards.

Documentation needed:

The main advantage in this credit card is you need not produce any proof of income. The banks request for a fixed deposit account. The minimum amount for the deposit is 30,000 INR or a lesser amount. You need to fill in the card application form and you will get your credit card immediately. Most banks do not ask for address or ID proof.

But ensure you are regular with the payments, as a default would result in money being deducted from the amount in the fixed deposit. In case the late payments continue, it will result in the bank lowering the allowed credit limit.

Add-on card:

As the name implies, the card is given as an additional card to a family member of a primary credit card user such as sister, brother, parents, daughter, spouse or son. Most often the benefits offered are the same as the primary credit card.

For issuing the card to children, they should be over 18 years of age.

The primary credit card user is responsible for any issues related to usage or payment.

Documents needed:

Banks request the following documents to be attached with the filled in application form.

  • Photocopy of Aadhaar card or PAN card, which is self-attested
  • Proof of address by furnishing a copy of utility bill, voter ID, ration card or passport.
  • Recent bank statement copy

Eligibility criteria

The credit score and payment history of primary credit card user is verified first.

In the absence of late or default payments the approval is easy and quick. The credit limit is however shared by the primary user and the add-on credit card user. The most significant benefit with the add-on credit card is you need not have credit history. It is the easiest and effective way to build a credit history from scratch.

About the author

Viveka Rao

Viveka Rao

Viveka Rao is post grad in finance and a freelance writer here at CreditSmart. A love for shopping and travel rewards has fueled her interest in personal credit, and making the most of rewards programs. She writes to educate other consumers in making great financial choices.

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