Credit cards these days have multiple perks associated with them - including discounts, reward points, cashback, frequent flyer miles, to name a few. You can also avail of credit card loans in select products. More often than not, having a credit card and maintaining a healthy credit history also improves your CIBIL score.
Rising demands and increased competition among credit card providers have positively affected the credit cards available in the market today. As a result, the process to apply and get approved for a credit card of your choice has gotten significantly more accessible, faster, and streamlined, eliminating the need for lengthy paperwork and long processing times. Now you can apply for credit cards online and get yours in a matter of days.
While the credit card application process has moved online, your eligibility to get one faster depends on multiple factors like your credit score, monthly income, repayment capacity, and more.
Credit cards for low credit or Starter credit cards
If you have been slacking on your credit card bills, there is a high chance that your credit score has suffered as a result. A CIBIL score lower than 630 is generally considered to be not good.
Improving a low credit score is a difficult task. However, you can still take some steps to recover from this situation. Secured credit cards are the simplest to obtain and excellent for improving your credit score.
Secured credit cards
Secured credit cards work similarly to unsecured credit cards, except they need a cash deposit to open. This deposit usually doubles your credit limit. A regular secure credit card, on the other hand, will almost always require a rigorous credit check to get authorized. You may be qualified for a credit card application for a standard, unsecured card after having a secured card for a length of time and demonstrating responsible credit usage.
When looking at secured credit card choices, look for cards that:
- don't impose annual or other fees
- provide the issuer the ability to expand
- improve your credit line.
You won't get much in the form of incentives with a secured card, but it can be a valuable tool while you improve your credit and have a fast approval rate.
Unsecured Credit cards
Some credit card companies provide the opportunity to build credit without putting down a security deposit, but these cards usually come with downsides. Because someone with limited credit is a risk and issuers base their interest rates on risk, they will come with higher interest rates when applying for a credit card loan. Your interest rates will depend on your credit history. The lower your credit score, the more effective your risk, and hence the higher your interest rates. When you get authorized, you may have to pay a one-time processing or program cost, as well as a monthly fee, an annual fee, and an APR of up to 30%.
Student credit cards
Student credit cards are intended for college students who are just getting started with their credit history. These cards may give rewards, and if they do, they're usually oriented toward the types of purchases that students make the most, such as dining out or travel costs.
Although some student credit cards offer prizes, you should also look for cards that include:
- instructional tools and incentives for responsible credit usage.
- When you're ready to upgrade to a card with greater rewards or advantages more suited to your spending.
- automatic credit line evaluations.
- credits for responsible use can help you create the habits you'll need to maintain a solid score over time.
Alternative credit cards for building a credit history
One of the most challenging obstacles to overcome while creating credit is proving your financial responsibility without a credit history to back it up. New and existing issuers are increasingly developing credit cards tailored to low-risk customers who lack a credit history. To assess your eligibility, they look at other financial facts (income, bank accounts, etc.) rather than your credit score. While some lenders recognize that this may be your first credit card, they provide credit-building benefits to help you get started faster.
Access credit by becoming an authorized/add-on user
You'll have access to another person's credit card account as an authorized or an add-on user; often, a parent or other trusted friend or family member. You'll get a credit card, and the account will be shown on your credit record, but the account holder is ultimately responsible for paying the bill. Therefore, it's critical to find an account holder who is financially accountable and pays balances on time to help you build credit.
Everything becomes feasible with a credit card, whether you wish to make online payments or swipe the card at a restaurant. But, don't be deterred by the word 'credit.' Credit cards can be a helpful tool for managing your short-term funding demands if utilized correctly. A credit card loan allows you to borrow money and pay it back in installments later. If paid on time, you will be eligible for more significant amounts in the future.
