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A credit card comes with a lot of benefits for the card holder. A credit card is a form of unsecured loan which is generally the first thing a person new to the workforce will get. Credit cards are a source of funds when you need it urgently without the hassle of approval.
On a credit card you get the option of interest free period during which, if you pay off your dues you need not pay any interest. If you find it difficult to pay your credit card bills there is the option of converting your bill into easy EMI which you can pay on your own time. It is because of these uses that credit card is very popular and that many people apply for it from banks.
Though everyone would like to have a credit card, getting a credit card approved is not easy. As already mentioned a credit card is a type of unsecured loan and does not require any collateral for borrowing, due to which there is high risk for banks. Banks will have certain criteria which a person needs to satisfy before a credit card application is approved. Following are list of credit card rejection reasons.
The reasons for a credit card rejection in India have been provided based on previous rejection experiences that applicant have faced and these reasons have found to be the most common across all major banks in the country.
Credit card rejection criteria may be any one or more of the following
Each bank has its own internal eligibility criteria for its credit card schemes. They are based on your salary, the place you work, the company you work for, experience etc. that any applicant needs to satisfy before moving ahead. If any person does not satisfy this criterion then the credit card application will be rejected.
Low Credit Score
One of the first and foremost reason for rejection is if the credit card applicant has low credit score. Any bank, when it gets a loan or credit card application will pull out the individuals credit score which is available with the number of credit bureaus operating in the country.
The credit score is the accumulated score based on how regular you were in paying back your loan or credit card bill. If your credit score is too low, then your credit card will be rejected.
It is best to check your credit score before you apply for a credit card and create your credit profile and know where you stand with respect to credit. This way if your score is low you can improve your score before applying.
A credit report contains the complete history of your loans or credit cards utilized by you, how regular you were in paying back your credit, late payments if any etc. If any applicant has the terms “settled” or “written of” against any credit account, your credit card application will be rejected as these terms indicate that you have defaulted on your loan or credit card due payment and that the lender has settled the account realizing that the individual will not pay back the balance.
Similarly, if there are any discrepancies like your date of birth is different from what is on your application then it is grounds for rejection of credit card. It is best to rectify any such discrepancies well in advance to avoid your credit card being rejected.
Changing jobs when the right opportunity with good pay comes along is normal. If a person changes jobs frequently say within 6 months or a year, then it creates an impression that the applicant is not dependable. In such cases the bank might reject your application.
You might be working in a company which is not in the list of approved employers by banks. In such cases the banks feel that your job is not secure and not reliable to pay back the credit card bill.
Salary is a very important criterion for a credit card. If you do not match the salary criteria stipulated by the bank, your application will be rejected.
There is also the other scenario where though you have higher income your application might have been rejected. This is because you might have lower disposable income which might not satisfy the bank’s criteria. That is, you do not have enough salary balance if any emergency comes along.
It can be seen from your credit report the number of credit cards a person has. If the bank feels you have too many credit cards to manage, they might not approve your credit card application.
If a person applies for credit multiple times in a very short period, you will look like you do not manage finances properly and is always looking for credit as you over spend. This shows, the bank that you are unreliable, and the credit card application might be rejected.
Now that we have seen the reasons for rejection, we can see the different types of credit cards available
There is no one type fits all credit card. With people having different requirements banks has split the benefits based on 6 different customer needs
1. Rewards credit cards
These are cards that provide high reward points for using the card for any spending. For example, a credit card will give more reward points for shopping online. This type of card will be useful to people who do a lot of online shopping. The reward points can be redeemed as cashback or get gifts from their rewards catalogue.
2. Cashback credit cards
Cash back cards are attractive as with a cashback card you get more as you spend more. For example, you get 10% discount for using your card while paying grocery bills. As the bill becomes high the cashback discount will be more.
3. Lifestyle credit cards
These are credit cards which provides benefits for dining, movie tickets, etc. This is also called fun credit cards as they give benefits for more experience-oriented services. For example, a credit card will give more rewards for dining or give 2 complementary tickets each month.
4. Co-branded credit cards
If you are fond of any particular brand, then you can get the credit card that is tailor made for that particular brand. For example, a co-branded card that gives 10% cash back for shopping at Lifestyle. This is a co-branded card for lifestyle.
5. Travel credit cards
These are credit cards that give more benefits for travel. For example, a credit card might give you more rewards or cash back for using the credit card to pay for train tickets booked on IRCTC website.
6. Elite credit cards
These are difficult to get credit cards which will have high annual and joining fee with really great benefits. Some benefits will include lounge access at airports or exclusive membership for a premium club etc.
These are fees and charges that you need to look out for in a credit card
Joining fees: This is the initial fees which needs to be paid to join or get a credit card. It varies between Rs.300 to Rs. 10,000 depending on the card you choose.
Annual fees: One the card has been acquired you will have to pay annual fees to renew/maintain the credit card. This annual fee sometimes will be reversed if spends on the cards reaches a certain limit as stipulated by the bank. For example, the annual fee of a card will be reversed if the spends for the previous year is more than Rs.1,50,000.
Do note that there are some credit cards which are offered lifetime free and are without joining and (or) annual fees.
Interest rate: The rate of interest is the charge levied on unpaid dues or when converting dues to easy EMI. It will vary between 30% to 46% per annum.
There are two scenarios to explain how Credit card rejection or disapproval will affect credit rating based on the application processing stage you are in
Scenario 1: If you go to the bank or visit their website to just enquire about Credit card processing fees, rate of interest etc. Your credit score will be pulled by the bank through different sources as an initial check. This is called soft enquiry and will not affect your credit score.
Scenario 2: On the other hand, when the bank directly pulls your credit score and credit history from any of the credit bureaus in India and find out that your credit score is low, your credit card application will be rejected. This type of enquiry is called hard enquiry. And it is this hard enquiry that will affect your credit score.
The credit card approval process & verification process is simple and much quicker for existing bank’s customers. They can apply online and get pre-approved offers on credit cards with attractive benefits or sign on bonus.
The application process is different for other customers. The card applicant needs to either apply online or directly download the application form from the official website or visit the nearest bank branch. They can also call the bank’s credit card customer care to proceed with the application process.
A bank representative will collect the filled in application form and all the necessary documents required for verification. The bank will do a background check on the customer’s home and professional information. If there are any discrepancies with the information provided, the credit card application is likely to be denied. After passing through document verification and eligibility criteria, the card will be approved and will be sent via courier or registered post.
In case your credit card application was rejected you will receive credit card rejection letter which will have details on why your application was rejected. You can also find sample letters online by searching for credit card rejection letter sample.
1. Are there any no rejection credit cards?
Since credit cards are a type of unsecured loans with high risk on the part of the bank they will verify the application thoroughly and will reject any credit card application if they do not cater to their eligibility criteria
2. What Is the credit card processing time?
Once the application is submitted banks will take about 7 – 15 working days to run the background verification to approve the credit card.
3. How to check credit card process status?
You can contact the bank’s credit card customer care to get the details.
4. Why was my credit card rejected/disapproved though I have good credit score?
As mentioned apart from credit score there are other factors that need to be satisfied before your credit card can be approved. If you do not cater to any criterion your credit card application will be rejected.
5. How to apply for credit card?
You can apply for a credit card on the bank’s website or by visiting the nearest branch where you can find the application form which must be filled and submitted.
6. What does credit card status: disapproved mean?
It means that your credit card application was rejected. You can get the reason for rejection from credit card rejection letter.
7. Does a rejection affect credit rating?
Yes, your credit score will take a hit if your credit card application was rejected. It is always best to check your credit score and make sure it is high as well as know the eligibility criteria for the credit card you are interested and that you satisfy them before applying for a credit card.
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