31 AUGUST, 2021

During a cash crunch, you have two options to meet your short-term financial requirements. You can redeem your savings or use a credit card to pay for your purchases. Opting for a credit card online is the best way to manage your finances without worrying about interest charges. It comes with a predefined credit limit that you can use to cater to your needs. The limit of your credit card is decided by your bank based on your repayment capacity. 

However, before getting a credit card online, you will need to consider whether it is the right time to apply for it. Some people opt for credit cards to establish their credit history, while others get a credit card to earn rewards, cashback, and bonuses. It would be wise to assess your reasons before applying for a credit card. You will have to make a wise decision, as you have to repay the credit card bills on time to avoid charges and penalties.

When should you apply for a credit card online? 

To understand when is the right time to apply for a credit card online, you need to define why you need a credit card and how are you going to use it.

  • When you meet the minimum age requirement
    Your credit card eligibility also depends on your age, and the minimum age requirement to get a credit card online is 18 years old. It is perhaps the ideal time to apply for a credit card, as it gives you a jump-start on building your credit score. You can improve your credit history at a young age. To get a credit card at the age of 18, you will have to convince your issuing bank that you have a stable income.
  • When you have a healthy credit score
    Before applying for a credit card, check your credit score and ensure that you have a minimum CIBIL score of 670 or greater. Having an excellent credit score warrants your credit card approval. Also, you can get the best credit card that comes with maximum benefits.
  • When you want to build your credit
    If you are a first-timer or you do not have a good credit score, you can get a credit card to improve your credit score by ensuring on-time repayments of bills. Secured credit cards tend to be the popular choice for people with low credit scores. 
  • When you need to make a large purchase 
    Most credit cards offer a 0% APR period that enables you to finance your large purchases and repay your credit card bills without incurring any interest charges. You can get an interest-free period of up to 2 years on purchases and balance transfers. 
  • When you have a large debt to pay 
    At times, the credit card bills can put a financial burden on your pocket. In such cases, a balance transfer credit card can help you pay off your debt faster and cheaper. It offers interest-free periods for up to 21 months. However, you will need to have a healthy credit score to go for a balance transfer. 

 

Circumstances under which getting a credit card is not advisable

If you do not use your credit card wisely, you will end up facing more trouble than usual. Here are the circumstances under which getting a credit card is not a good idea:

  • When you spend more than you can afford to repay
    Increasing the limit of credit while knowing that you cannot afford to make on-time repayments is not wise at all. Since you do not have enough income to pay your bills on time, late payment fees and penalties charges are inevitable. 
  • When you lose your job
    Your income is one of the crucial factors that your lender considers before approving your application. It indicates whether or not you can repay your credit card bills without any delay.  A reduced income indicates that you do not have the repayment capacity. Banks will deny your credit card application after finding that you have lost your job.
  • If you want to apply for a home loan or new car loan
    You should avoid opening a new credit card account if you are planning to get a home loan or a new car loan. Lenders make a hard inquiry every time you apply for a loan, and applying for multiple loans can negatively impact your credit score. Having a low credit score reduces your chance of securing a loan. 
  • When you recently applied for a loan or credit card
    If you recently applied for a credit product, it would be wise to refrain from applying for a credit card for at least six months. When you apply for a new credit product, an inquiry will appear on your credit report, causing a significant reduction in your credit score. Credit card issuers consider the frequency of your credit card application, and applying for multiple credit cards at the same time will jeopardize your plan of securing a new credit card and also lower your credit rating. 


In short
A credit card is the best way to build credit and finance purchases. However, it can hurt your credit score and cause debt if you do not use it judiciously. Therefore, you should apply for a credit card online based on your repayment capacity.

 

 

Latest Comments

Leave a Comment

200 Characters


Read Next

understanding-the-benefits-of-credit-card-balance-transfer-art

Things to know before applying for your first Credit Card

Credit cards have become the most important financial.....

smartways-article

The Best Credit Card Benefits That You Can Avail

In today’s age of digital rage, credit cards make for an indispensable part of wallet for daily transactions. 

Ways to keep track on your money well through a credit card article

5 Ways To Keep Track Of Your Money While Using A Credit Card

When used wisely, a credit card is the best resource......

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.