Credit cards let individuals borrow funds for day-to-day expenditures from financial institutions under some specific conditions. One of the fundamental terms that accompany these cards is the timely repayment of the borrowed amount. Therefore, card issuing companies determined a few qualifying measures to reduce the financial risk of lending that may arise out of any default or delay in such repayment. Hence, applicants need to check their eligibility before they go for their credit card online application process.
These qualifying parameters may differ across lenders as well as different product lines. However, an excellent credit profile, high credit score and promising monthly income play a crucial role in making an individual eligible for credit cards. So, borrowers should maintain a zero default and timely payment record to achieve a credit score above 750 that is considered as a par score.
Below factors are also vital to remember while applying for a card-
A credit card application is not a single click task. It requires a thorough analysis of several aspects and underlines credit elements of the applicant’s profile. Thus, to understand how to apply for a credit card, applicants should be aware of their financial potential.
Borrowers need to know their FOIR or fixed obligations to income ratio by analysing monthly earnings and fixed financial commitments in the first place. Most financiers keep the threshold of this ratio at 45-50%. That means applicants should occupy not more than 45-50% of their monthly earnings for fixed expenditures.
It improves the repayment capacity, thus allowing cardholders to ensure timely repayments and manage their credits efficiently.
Assessment of all existing credit accounts is also crucial to determine whether individuals can bear another repayment or not. Moreover, it also provides an insight into their present creditworthiness.
Holding too many debt accounts can decrease the approval chances as it increases the risk of defaulting. So, borrowers should try to clear off and close multiple credit accounts as much as possible to increase their eligibility when opting for an online credit card application.
The credit limit sanctioned by card issuers suggests the maximum threshold of borrowed amount permissible to spend within a billing cycle. However, credit card users should be mindful while spending through this limit.
The closer users reach this limit, the more risk and damage to their credit profile. As per experts, borrowers should keep their expenses below 30-40% of the allowed limit. For example, if the limit stands for Rs.50,000, card users should not spend more than Rs.15,000-Rs.20,000.
Rate of interest
Interest rates on credit cards are significantly high across lenders, and that makes it one of the most important things to know before apply for a credit card. However, it would not be a concern if borrowers can pay the total monthly bill at once by the end of the grace period.
Contrarily, if users choose to pay the minimum due and carry the balance, higher APRs can accumulate a substantial payable amount. So, cards that come with competitive interest rate and an extended interest-free duration, should be taken into consideration.
Loyalty programs are additional benefits offered by financiers on every purchase. Cardholders can avail the benefits of the loyalty rewards by converting the reward points into vouchers, discount coupons, cash backs, etc. and use these to make future purchases. So, individuals should pick a credit card according to their spending habits in order to make the most of the reward programs.
For example, users who are obtaining cards for business expenses should pick an option that offers accelerated reward points on purchasing office essentials or making business travel bookings.
Before going for an online credit card application, individuals should compare the features and benefits on offer from different card issuers. Once the application is submitted with the selected issuer, applicants can find several ways to check their credit card application status.
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