How to Apply For a Credit Card for the First Time

Just a decade ago, credit cards were a luxury, with stringent eligibility criteria making them accessible to only a select few. However, the landscape has undergone a remarkable transformation. In this blog, we will talk about how you can apply for a credit card for the first time.

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From a mere 2 crore credit cards in circulation in 2011, India has witnessed staggering growth, with the number soaring to an impressive 10 crore by 2024. The calendar year 2023 alone saw the addition of a whopping 16.71 million new credit cards, significantly surpassing the 12.24 million cards issued in 2022. This trend of consistent growth has been a hallmark over the past five years, with the number of credit cards in circulation swelling by nearly 77 % from 55.53 million in December 2019.

So, if you are someone who wants to get your first credit card to unlock a bit more convenience and financial freedom, this article is for you. As a young adult, a credit card can offer you convenience, flexibility, and the opportunity to build a strong credit history.

Understanding the Basics of Credit Cards: How Credit Cards Works

Before diving into the application process, it’s crucial to understand the fundamentals of credit cards. A credit card is usually a plastic card issued by a bank or other financial institution. It provides you with access to a pre-approved credit limit that you can use to make purchases and access services. You must repay the used credit within a specified period.

A credit card functions similarly to a loan. However, instead of receiving cash upfront, you are given a set credit limit to spend. The issuer determines this limit, and you are required to repay a certain amount to the lender by the end of each billing cycle.

For instance, suppose you have a credit card from an Indian bank with a credit limit of ₹50,000. You decide to buy a smartphone costing ₹20,000 using this card. You can either pay back the ₹20,000 within the next billing cycle to avoid interest, or you can choose to pay it off over time, in which case interest may be added to the amount you owe.

Each month, you’ll receive a statement detailing your transactions and the total amount due. It’s essential to pay your bills on time to avoid interest charges and maintain a good credit score.

Checking Your Eligibility

To apply for a credit card in India, you typically need to meet certain eligibility criteria. These may include:

1. Age: You must be at least 18 years old to apply for a credit card in India. Some banks may have a higher minimum age requirement of 21 years.
2. Income: Most banks require a stable source of income to approve your credit card application. The minimum income requirement varies between banks and cards, ranging from ₹15,000 to ₹25,000 per month.
3. Credit Score: Although you may not have a credit history as a first-time applicant, maintaining a good credit score from the start is essential. A credit score of 750 or above is considered good and can improve your chances of approval.
4. Nationality: You must be an Indian citizen or a Non-Resident Indian (NRI) to apply for a credit card in India.

Choosing the Right Credit Card

With numerous credit card options available in India, it’s essential to choose one that aligns with your needs and spending habits. As a first-time credit card user, consider the following factors:

1. Fees: Look for credit cards with low or no annual fees to minimize costs. Some banks offer lifetime free credit cards, which can be a good option for beginners.
2. Rewards: Choose a card that offers rewards and benefits that suit your lifestyle. For example, if you frequently shop online, look for cards that offer higher reward points or cashback on online purchases.
3. Eligibility: Ensure that you meet the eligibility criteria for the card you’re interested in. Some banks offer credit cards specifically designed for students or young professionals.
4. Brand: Consider the reputation and services provided by the card issuer. Opt for well-established banks with a good track record of customer service and security.
5. Use 1 Finance Credit card Scoring & Ranking System:1 Finance has developed a powerful engine designed to refine your credit card search, maximize benefits, and evaluate how well your cards align with your needs.

Preparing the Required Documents

To apply for a credit card in India, you’ll need to submit certain documents along with your application. Keep the following documents handy:

• Identity Proof: Aadhaar Card, PAN Card, Passport, Voter ID Card, or Driving License.
• Address Proof: Aadhaar Card, Passport, Voter ID Card, Driving License, Utility Bills, or Rental Agreement.
• Income Proof: Salary Slips (last 3 months), Bank Statements (last 3 months), or Income Tax Returns.
• Photographs: Recent passport-size photographs.

Applying for Your First Credit Card

Once you’ve chosen the right credit card and gathered the necessary documents, you can proceed with the application process. Here are the steps to apply for a credit card for the first time in India:

1. Visit the bank’s website or nearest branch to access the credit card application form.
2. Fill out the application form accurately, providing all the required information such as personal details, income, and employment status.
3. Submit the completed application form along with the necessary documents.
4. The bank will verify your details and assess your eligibility based on factors like income, credit score, and employment stability.
5. If your application is approved, the bank will send you a confirmation and your new credit card within a few days.
6. Upon receiving the card, activate it as per the bank’s instructions, usually by calling their customer care or through net banking.
7. Set up a strong PIN for your card and sign on the back of the card to prevent unauthorized use.

Using Your Credit Card Responsibly

As a first-time credit card user, it’s crucial to use your card responsibly to build a positive credit history and avoid falling into debt. Follow these tips to manage your credit card effectively:

• Set a budget: Determine how much you can afford to spend each month and stick to your budget. Avoid overspending just because you have a credit card.
• Pay your bills on time: Always pay your credit card bills on or before the due date to avoid late payment fees and high-interest charges. Set up automatic payments or reminders to ensure timely payments.
• Pay in full: Try to pay your credit card balance in full each month to avoid accruing interest on your purchases. If you can’t pay the full amount, pay as much as possible above the minimum due.
• Monitor your statements: Regularly review your credit card statements to track your spending and detect any unauthorized transactions. Report any discrepancies to your bank immediately.
• Avoid cash advances: Cash advances often come with higher interest rates and fees compared to regular purchases. Avoid taking cash advances unless absolutely necessary.
• Keep your credit utilization low: Aim to use no more than 30% of your credit limit at any given time. High credit utilization can negatively impact your credit score.

Building a Good Credit Score

Your credit card usage plays a significant role in building your credit score, which is crucial for future financial opportunities like loans and mortgages. To build a good credit score, follow these practices:

1. Make timely payments: Consistently paying your credit card bills on time is the most important factor in building a good credit score.
2. Maintain low credit utilization: Keep your credit card balances low relative to your credit limit. High utilization can lower your credit score.
3. Limit new credit applications: Avoid applying for multiple credit cards simultaneously, as each application results in a hard inquiry on your credit report, which can temporarily lower your score.
4. Monitor your credit report: Regularly check your credit report for errors or discrepancies. You’re entitled to one free credit report per year from each of the major credit bureaus in India.

Pros and cons

Pros of Using Credit Cards:

1. Facilitates Large Purchases: Credit cards allow you to make significant purchases and spread the cost over several months, making it easier to manage big expenses without needing the full amount upfront.
2. Safety and Convenience: Carrying a credit card is safer than carrying large amounts of cash. It is also widely accepted in most places, providing a convenient payment method.
3. Credit Score Improvement: Regular use and timely repayment of credit card dues can help in building a good credit score.
4. Rewards and Offers: With a good credit score, you can qualify for additional perks such as cashback, lower interest rates, and other attractive offers.

Cons of Using Credit Cards:

1. Debt Accumulation: Without careful spending, it’s easy to accumulate substantial debt, which can become challenging to repay.
2. Impulse Buying: Having a credit line might encourage impulsive purchases, as it gives the illusion of always having money available.
3. Negative Impact on Credit Score: Failing to meet monthly payments not only forfeits any benefits but also harms your CIBIL score, affecting future loan and credit opportunities.
4. Interest Costs: If balances are carried over from month to month, the interest can add up to a significant debt over time.

Conclusion

Getting your first credit card in India is a significant step towards financial independence and building a strong credit history. By understanding the process of applying for credit cards, choosing the right card, and using it responsibly, you can enjoy the benefits of convenient and secure transactions while laying the foundation for a bright financial future.

Remember to always pay your bills on time, keep your balances low, and monitor your credit score regularly. By following the tips and guidelines provided in this guide, you can confidently navigate the world of credit cards and make the most of this powerful financial tool.