A credit card is a very convenient financial product that you can use to purchase a variety of items ranging from daily essentials such as groceries to buying expensive products like laptops or television. Credit Cards are very easy to use and offer quick and easy transactions instantaneously. You can also use them to get amazing benefits such as rewards and cashback on all your spends.
When you start earning and think of managing your finances efficiently, getting a credit card is one of the first options that come to your mind. However, it is difficult to get a credit card with no credit history. There’s also a limited variety of credit cards that you can choose from when you are applying for the first time. This is because if you are a student, or got a job for the first time, you probably don’t have a credit history. Without a credit history, you won’t have a credit score which is one of the most crucial criteria for the banks to issue a credit card to someone. Hence, banks are cautious when giving credit cards to first-time users. Banks that issue credit cards to new users also ensure that their credit limit is low so that the bank has limited liability.
Nevertheless, a few banks offer entry-level credit cards and it is possible to avail of one if you follow the initial application process carefully. Read through the article to gain a better insight on things you need to keep in mind while applying for your first credit card.
Check your eligibility
Every card issuer has a different set of criteria for its applicants. These issuers evaluate your credit card application against parameters such as age, nationality, income, credit score, etc. When you fail to meet these parameters, your application might get rejected. Hence it is essential to know about the eligibility criteria of the bank at which you wish to apply for the credit card.
For reference purposes, the eligibility criteria for HDFC Bank Credit Card are as follows :
- If you are a salaried individual, you must be between 21 and 60 years of age
- If you are a self-employed individual, you must be between 21 and 65 years of age
- You must be an Indian resident or a non-resident Indian
- You must have a regular source of income
- You must meet other card-specific requirements
Have the required documents ready
Similar to the eligibility criteria, the documents needed to apply for a credit card will differ from bank to bank. You will need to check the list of documents through the bank website and make sure that you have the updated version of these documents. However, here is a basic list that you will need to submit to apply for a credit card :
- Filled application form
- Passport size photographs
- Proof of residence (Aadhar, PAN, utility bills, driving license, etc.)
- Proof of identity (Aadhar, PAN, passport)
- Latest salary slips
- Bank statements
- Form 16
If you are a self-employed individual, you will need to submit :
- Income proof
- Proof of business
- Statement of accounts
You will have to provide your student ID with the application if you are applying for a student credit card.
Choose a card with a low annual fee and other associated fees
When comparing credit cards, go through the Most Important Terms and Conditions (MITC) on the bank’s website so you get an idea about the fees and other charges associated with that credit card. Take note of a few things like cash advance fees, late payment fees, the interest rate charged on balance amount, cash withdrawal charges, GST, foreign currency markup fees, etc to gain a better understanding of it.
Having a low annual fee for first-time credit card users is beneficial as it helps them in building a good credit score with a lower risk. Although a high annual fee comes with many perks and rewards, it is essential to note that there are higher interest rates associated with them as well. Also, paying high credit card fees as a first-time user might get overwhelming, and can accumulate debt if not paid on time. Hence, if you are using a credit card for the first time, take some time to build financial discipline, and then according to your spending patterns, upgrade to a credit card with a higher annual fee.
Check List of Top Low-Interest Credit Cards here
Compare rewards and other perks
There are multiple benefits and perks of different credit cards. Even entry-level credit cards offer a host of special offers to choose from. You can compare these cards and choose the one that offers the benefits that you want the most. Some credit card types to compare are: Lifestyle credit cards, rewards credit cards, travel credit cards, business credit cards, and shopping credit cards. These credit cards offer an array of rewards such as cash backs, discounts, reward points, airport lounge access, and fuel surcharge waivers. You must also read the terms and conditions associated with the offers to gain more clarity.
For example, ICICI Amazon Pay Credit card has no annual fees and offers 5% cashback to Amazon Prime members on all Amazon spends, whereas for Amazon Non-Prime members it offers 3% cashback. Similarly, for travel-related benefits, Axis Bank offers the Vistara Signature Credit Card through which frequent travelers get the the opportunity to avail up to 4 premium economy tickets annually by reaching spending milestones.
Avoid applying for many credit cards at once
Initially, you might be tempted to apply for multiple credit cards at once to get promotional sign-up bonuses, but applying for multiple credit cards at once usually backfires. If you do so, then you will come off as a credit-hungry person to the credit card issuers and it might put your application at risk. If you already have a credit history, submitting multiple applications for a credit card can hurt your credit score. Hence apply only at one bank and use that one to gradually build up your credit score and then apply for the next after a few months, ideally, 6 months works best.
Best entry-level credit cards to choose from
Now that you have a basic idea about applying for your first credit card, you can choose the credit card that would work best for you. Below is a list of the best entry-level credit cards to choose from :
HDFC Bank MoneyBack Plus Credit Card – This is a suitable credit card for people who often shop online. It offers 10X reward points on shopping through Flipkart, Amazon, BigBasket, Reliance Smart Super Store and Swiggy. You also get up to 15% off when you dine-out at restaurants in select cities.
Amazon Pay ICICI Credit Card – Amazon Prime users get 5% cashback on spends whereas Amazon Non-Prime users get 3% cashback. This card is lucrative if you shop through Amazon often.
Axis Bank Ace Credit Card – As a cardholder, earn 5% cashback when you pay bills on Google Pay and 4% cashback when you use Swiggy, Zomato or Ola.
SBI SimplyCLICK Credit card – Get 10 times for reward points when purchasing through websites such as BookMyShow, UrbanClap and Cleartip. Also get an Amazon e-gift voucher worth Rs. 500 as a joining benefit
HSBC Cashback Credit Card – This card has amazing introductory offers and you can receive welcome benefits such as Amazon voucher worth Rs. 1000, 5 Myntra vouchers worth Rs.1500 if you spend a minimum of Rs. 1000 in the first 30 days in a single transaction.
Options for getting a credit card with no credit history
Your credit score is one of the most important parameters of evaluation for your credit card application. Lenders are hesitant to give a credit card to someone with no credit history. Nevertheless, it can be possible to apply for entry-level credit cards and build your credit history from scratch, in this case, you can consider two options :
Applying for a secured credit card – It is fairly easier to get a secured credit card than an unsecured one, especially if you are a first-time credit card user. For availing of a secured credit card, the applicant has to submit a security amount or collateral which the bank usually keeps in the form of a fixed deposit. One example of a secured credit card is the SBI Card Unnati. It is free for the first 4 years but you will have to submit a security deposit of Rs. 25,000 or more. A person will only be allowed to take a credit of 80% of the security deposit to a maximum of Rs. 5 Lakhs.
Applying for an unsecured credit card – For people with no credit history, it is difficult to avail of an unsecured credit card. These credit cards do not require collateral or security amounts. You can try applying for an unsecured credit card if you have sufficient income that shows your creditworthiness. You can do so by getting a credit card based on your salary statement, this is applicable if you are working in a private or public company for more than 6 months. It is recommended that you apply for a credit card at the bank where you have your salary account as the document verification process gets easier for the bank and you can get a quicker decision of whether your application has been accepted or rejected. You can also get a credit card against a fixed deposit. The best thing about this method is that your Fixed Deposit will continue to gain interest while you spend on your credit card. However, ensure that you make timely payments to build a good credit score.
The Bottom Line
Applying for a credit card for the first time can be challenging for some people owing to the terminologies, terms, and conditions associated with it that not many people are aware of. However, if you have made up your mind to get a credit card, you can research it and gain knowledge related to it. This way you can gradually grow your credit card awareness and apply for entry-level credit cards. Once you avail of this credit card, you can build your credit score and apply for the credit card that you are eyeing in the next six to eight months. Remember that building credit is a long-term process and you need to be patient and consistent while managing your finances.