Does Income affect credit card approval?

Credit card application

Financial institutions have made it easy for prospective cardholders to get a credit card. Apply online, and submit a few documents to complete your credit card application process. That said, financial institutions concern themselves with two main factors when an individual wishes to apply for credit card access — income and credit score.

1. Credit score

To ensure that an individual is trustworthy and accountable towards their commitments, banks incorporate credit scores in their eligibility criteria. The reason behind this incorporation is their want to assess the extent of risk you can bear. The higher the credit score, the more likely you are to gain acceptance for the attainment of a credit card.

2. Income

To prevent the engagement in any predatory credit card activities, financial organizations need to first guarantee that an individual has what it takes to pay their monthly bills. For this purpose, they ask for income proof when applying for a credit card. Based on the level of income earned, banks set credit limits as well, taking into account any interest you may have to pay along the way. The Credit Card Act of 2009 in the United States of America (USA) provides banks with the right to exercise the ability to ask and check your income before deeming you worthy of receiving a credit card.

An adulting series

The turbulent economy has led to widespread frustration amongst young adults above the age of 21 years. This worry mostly stems from their inability to decide which income source to disclose to financial authorities when applying for a credit card. In this case, any source of income that seems stable, and provides you with continuous access, is deemed appropriate for disclosure. This includes investment income, trust fund or gift related income, part-time allowances, alimony or child financial aid and pensions, or retirement income. In 2012, the Consumer Financial Protection Bureau (CFPB) amendment also stipulated that a partner’s income (categorized as household income) can be lodged in documents under ‘income’.

Before submitting any authentic documents to your pertinent bank, computations of your level of income must be accurate for your awareness. For newbies, a few terminologies or document appellations must be remembered. Gross income refers to your aggregated untouched income. To calculate your monthly income, dividing your gross income by twelve is necessary. Net income, in simple words, is the amount from which you can factor in your daily expenses. This amount is the gross income after the subtraction of any mandatory amounts such as taxes and miscellaneous expenses. Hourly wages multiplied by the number of hours and weeks you earn your living can help you in finding your gross income.

The process of setting credit limits

Income plays a significant role in setting your credit limit. As emphasized earlier, the legal obligation to evaluate your annual or monthly income statement is to ascertain whether you hold the capability to pay back any debt you incur. Credit companies generally set the credit limit anywhere from 25% to 100% of your net income, although the latter is less practical. Other than this, a few other documents are requested for and scrutinized before setting your limit, and completing the credit card online application procedure. Cross-referencing your documents with extant credit limits on other credit cards are sometimes looked into. Active routine rent or mortgage payments are also imperative to gauge before setting credit limits. Finally, any available debt payments or loans must also be investigated to confirm whether you will be occupied elsewhere.

Changes in credit card laws in India

Coming into effect from 1 October 2020, the Reserve Bank of India issued new guidelines in support of credit card laws in India. While they do not relate to income and credit card applications, they must be borne in mind by every citizen in India.

1. Following the onset of the Coronavirus pandemic, alterations have been made to contactless and online facilities for the convenience of citizens in India. Citizens now have the ability to set their spend limits, opt-in and opt-out services, and other services of similar nature.
2. All card issuing organizations have halted their online service provisions to card holders that have not yet used their respective card to complete online or contactless transactions.
3. Before these laws were implemented, card owners could use their card in any country by default. However, individuals must now notify and make changes to their account if they wish to utilize their card in any country in the world.
4. During the interval of issuance or re-issuance, all card services — debit and credit card services — can be availed at automated teller machines (ATMs) and point-of-sale machines only.

Recent establishment

A recent initiative was inaugurated in India through a partnership between RBL Bank and Bajaj Finserv Ltd. together, these two corporations introduced the Bajaj Finserv RBL Bank SuperCard in India. With the power of four cards in one, this Bajaj Finserv credit card is aptly called a ‘SuperCard’. This instant approval credit card comes with benefits, such as huge savings of up to Rs. 55,000 annually, no interest upon ATM withdrawals for fifty days, and effortless EMI conversions. They also account for flexibility in terms of availing personal loans for ninety days (with a nominal interest rate of 1.16%* per month), and zero processing charge. Treat yourself after a stressful week to an investment in one of the best credit cards in India, the Bajaj Finserv RBL Bank SuperCard.