Till a few years back, having money in your wallet simply meant that you were carrying around a stack of currency notes and coins. Fast forward to the present day and money in your pocket can mean something else entirely. This is due to the advent and acceptance of plastic money i.e. credit cards. In case you are planning to join the group of credit card holders in the near future or are planning to get an additional card, read on to find out five key steps involved in applying for a credit card:
Step 1. Figure Out your Requirement
This is possibly the most basic step and often the most overlooked one. Knowing whether you want to use your card for shopping, dining, fuel, travel or other expenses is the key to availing the maximum benefit from your card. In case you are a frequent traveler, a travel rewards card would definitely suit you better than a credit card that provides you with store credit on your shopping purchases. Similarly, if you are the type of person who prefers cash rewards on your purchases, a cash back card may be much more up your alley than a dining rewards card.
Step 2. Do in-depth study of your options
Once you have clearly defined your need, check out the options available that suit your specific needs. As the market for credit cards has grown exponentially in India, so has the bouquet of offerings provided by each credit card issuer. Some key factors to consider when choosing a credit card include the following –
- Joining/Annual Fees – Usually zero is best, however, premium cards do have unique benefits.
- Rewards Program – Cash back, freebees, discounts etc.
- Complimentary Features – Lounge access, travel insurance/accidental insurance etc.
- Acceptance – Usually Visa and MasterCard are accepted by most merchants, but American Express and Discover/Diners’ Club cards tend to have better reward programs.
This research can be performed by you easily by using an online credit card eligibility tool. When you input your details, such a tool lists all your options and provides you with a platform for further research.
Pro Tip : In some cases you get a waiver on the joining and annual fees if you spend beyond a certain limit mentioned by the card issuer agreement.
Step 3. Get hold of your Credit Report
A credit card is a borrowing instrument and your credit score plays a key role in determining if your application would be accepted or rejected by the card issuer. Your credit score is a statistically generated 3 digit number ranging between 300 and 900, which represents how well you have handled your borrowing instruments in the past. You can easily get hold your credit score by requesting it from various credit bureaus operating in India. You can access your free Experian Credit score online through Paisabazaar.com, while the CIBIL TransUnion score is available in lieu of a fee from the CIBIL website. Knowing your credit score is important as a low score can get your card application rejected. Such a rejection further impacts your score that can cause problems when you apply for credit cards or loans in the future.
Pro Tip : The closer your credit score is to 900, the better are your chances of success when applying for a credit card or a loan.
Step 4. Complete the Application and Collate the Documents
Once you have selected a card that suits your needs and you have confirmed that you have a sufficiently high credit score, you should go ahead with completing the credit card application. At present, you have the option of applying either online or offline. The online system provides you with the option of applying for a card from the comfort of your home or office and you might also be eligible for special offers/discounts on selecting the online application option.
Though no physical documents are required at the time of submitting the online application, you will have to collate relevant documents and submit it to the card issuer at a later date for verification and consideration of your application. The list of required documents is mentioned on the application form and would also reach you through communication from the bank. So, make sure you have collated those documents and have them ready for submission to minimize the processing time of your application.
Step 5. Complete the Verification Processes and understand the card user agreement
Before you card is issued, there are multiple rounds of verification that the prospective card issuer performs. These include the verification of the submitted documents and credit history check as well as physical and telephonic verification at your residence/office address as well as phone number. You card is issued and sent out to your address only after you have successfully completed multiple rounds of verification.
Once you receive your new credit card, make sure you read through and understand all the documentation that is included. Do not shy away from asking questions by calling up the card issuer. For more information on credit card terminologies read the article “Demystifying Key Credit Card Terminologies”. Activate your card only when you are satisfied that the credit card you received is the one that actually suits your needs.
The steps described above are just an overview of best practices that you can follow when planning to get a new credit card. They hold true for first timers as those looking to opt for multiple credit cards.