September 24, 2024 · 11 mins read
Santosh Kumar
The post-pandemic market volatility has left business owners and salaried individuals seeking loans or credit cards. A credit card is especially important for the business community in India, as it helps them procure raw materials and other products without liquid cash.
Salaried individuals and entrepreneurs generally find it easy to get a credit card, but what happens if you have just lost your job or have suffered huge business losses?
Banks and other financial companies assess income and employment/business status before issuing a credit card to prevent default risks. Traditionally, you will have to furnish documents showing your source of income and income tax returns before becoming a credit card holder.
So what happens if you have just lost your job or lost a major source of income? Are you still eligible to apply for a credit card?
Yes, you can still get a credit card without any proof of income as long as you meet the conditions or agree to the terms and conditions of issuance.
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Having a credit card is necessary for almost everyone. Whether you are a salaried individual or a business owner, a credit card can offer numerous benefits and even improve your financial situation in the long haul.
In addition, banks and financial institutions offer credit cards under various schemes tailored to the cardholder's lifestyle and spending habits.
Here are some benefits of credit cards:
Credit cards can be a boon in case of financial emergencies. Whether you are travelling to work or on holiday, a sudden need for money can arise anytime. With a credit card, you can be stress-free and spend on essential items rather than borrowing from a friend or relative.
Whether you are a salaried individual or a business owner, cash flow is necessary on a daily basis. Credit cards can help you in this aspect. You can purchase or pay bills with a credit card when cash is low and then pay off the balance as your situation improves. Additionally, you can use credit card rewards to earn discounts on certain purchases. Some credit cards do not charge any interest and even allow you to transfer balance, adding to monetary convenience and your peace of mind.
Read More: How Credit Card Usage Makes or Breaks Your Credit Score?
Another major benefit of credit cards is the ability to improve your credit score. Your credit score tells financial institutions about your creditworthiness and determines whether you are trustworthy enough to be granted a loan.
When you make timely payments on your credit card and keep the balance low, you contribute to a higher credit rating. This is helpful when applying for another credit card with a higher limit or for home and car loans.
Credit card providers offer several rewards and discount programs, such as added perks or cashback offers. Many such companies are tied up with other leading brands like Myntra and Amazon, which allows you to purchase products at a discount when using your credit card. These rewards can be redeemed while travelling or purchasing, thus maximizing the value of the card. Using your credit card strategically can help you save money.
Travel enthusiasts can definitely make the most of credit cards. Many providers offer travel benefits like travel insurance, airport lounge access, discounts on flights or hotels, and more. If you are planning a holiday at a new destination, a credit card can be a very useful tool to compartmentalize your travel budget. Plus, you can also earn points for every rupee spent by the card, which can be redeemed for travel or accommodations.
At the very basic level, credit cards allow you to spend any time anywhere without the need for liquid cash. Emergency or unexpected situations may arise at any time, such as healthcare costs, travel expenses, and more. When you are facing a shortage of liquid cash, credit cards can be a lifesaver.
Those using credit cards on a daily basis can keep better track of their expenses and monthly budget. You can assign a spending limit within your financial means and optimize savings more effectively, rather than relying on bank statements to match expenses with your needs.
Many people tend to overspend on food and shopping, which can be tracked in real time with credit card apps. Monitoring them closely will allow you to cut back on excessive expenses and compartmentalize your budget efficiently. Most credit card providers provide a dashboard that breaks down your expenses into categories, giving you more control over your spending habits.
Read More: Best HDFC Credit Cards for 2023: Key Features & Benefits
Here's the good news - many banks and financial institutions provide credit card services without demanding proof of income. But here are some steps you can take to ensure you are eligible and meet certain criteria before applying for a credit card with no income proof:
Having a bank account is a credible aspect for credit card lenders - it informs them that they have some guarantee in case of a default.
Having a financial plan is critical before opting for a credit card. If you have debts on your name currently or potentially in the future, opting for a card with a low credit ceiling is better. Many banks reject individuals against the sole source of household income. By ensuring your debts don't keep adding up, you also foster credit consolidation, which increases your creditworthiness.
If you apply for a credit card jointly with your spouse or parents, you will have better chances of getting one. This is because credit card companies want to ensure their dues and interests, if any, are cleared. Co-holders who are related to you by marriage or blood decrease the chances of default payments and fraud - thus improving your chances of obtaining a credit card.
This is especially important for freelancers and work-from-home professionals. Adding all sources of income, even temporary ones like freelancing or standalone projects, shows your financial independence and hence eliminates the need for income proof.
Read More: How to Choose the Right Credit Card for Your Lifestyle in India?
Catering to customers' needs, many banks now offer credit cards against a fixed deposit, known as secure credit cards. All you need to do is have a bank account at the institution and open a fixed deposit account with the required amount. The bank will determine the credit limit, which is generally up to 75% of the total deposit amount.
This means that for a fixed deposit of Rs. 50,000, you can get a credit limit up to Rs. 35,000. All you need to do is deposit a slightly higher amount than what you need for credit. This scheme has gained popularity recently due to the minimum documentation requirements and low interest rates. As the recovery amount is already fixed and deposited with the bank, there is also no need for proof of income.
You can also apply for a credit card against a primary card owned by your parents or other family members. However, the primary cardholder must have a good credit history to receive this card. If their CIBIL score is good, the secondary cardholder can get a credit card without proof of income. The add-on card also carries the primary credit card's benefits, minimum documentation, and no joining fee.
Read More: Is 650 a Good CIBIL Score?
CIBIL score can only be improved by strategic planning - there are no short fixes. You can follow the list below to ensure your credit score is strong enough to fetch you a credit card:
Any loan in your name will significantly impact your CIBIL score, both for the good and bad. If you miss your EMI payments, your CIBIL score will plunge below 600. If you repay all dues on time, you are an ideal candidate for a credit card. Make sure you are aware of the due dates for paying EMIs. Along with a negative CIBIL score, you will also have to pay steep penalties for late payment.
The best way to ensure you pay your EMIs on time is to set up automatic payments from your account, where a fixed amount will be deducted every month. You can also set reminders to repay loans on time.
If you own a credit card, whether personal or corporate, it's essential to clear your credit before the due date. Any payment default or late payment will significantly lower your CIBIL score. All payments you have missed will be reflected in your credit report.
If you are unable to clear the entire amount by the due date, try to pay the minimum amount so that a report isn't filed with the credit bureau. In this case, you still may have to pay interest accumulating until payment, but you will get an extended period without affecting your CIBIL score.
When you want to know your cCIBIL score, you may either make a soft or hard enquiry. When you check your credit score to be aware and plan ahead, it is called a soft enquiry and has no impact on your credit score.
A hard enquiry is when a financial lender fetches your credit report from the credit bureau against your loan application. If you continue making loan demands even after facing rejection, your CIBIL score will be lowered.
This is because your continuous desire for credit will be against your creditworthiness and may lead to further loan or credit card rejections.
The credit bureau will lower your CIBIL score in case of multiple enquiries. So make sure you plan soundly and compare your options before approaching a single lender.
Read More: What is the Use of CIBIL Score?
Financial lenders trust applicants who have a long history of successfully repaying their credits on time. If you have any old credit card account in your name or jointly in your name, do not close it even if you are not using it anymore. While it may not significantly impact your CIBIL score, it will help you get a credit card in the future without submitting proof of income.
Administrative errors are commonplace. As such, you may notice your CIBIL score is surprisingly low even though you have paid your dues on time. This could be due to a number of reasons, such as incorrect personal information or account details, outdated overdue amounts, etc.
Please check our CIBIL score for errors or suspicious events. If you find anything fishy, raise a grievance with CIBIL online and resolve the issue.
Read More: How Students with No Income Can Get a Credit Card
Make sure you have a good credit rating and alternate sources of income, such as rent, if you cannot show proof of income for a credit card application. If the card lenders consider you creditworthy, you can easily get a credit card and all its benefits, even without proof of income. In the end, if you have a stable income with a good credit history, you are eligible for a credit card with no income proof.
How can I get a credit card without a salary account?
A credit card without a salary account can be obtained either by fixed deposit or through a primary cardholder in your family.
Which documents are required to obtain a credit card without proof of income?
You need to submit address proof, identity proof, age proof, and proof of funds that act as a security against your credit card.
What is the minimum fixed deposit amount to obtain a credit card?
While this varies from one financial institution to the next, most banks stipulate a minimum fixed deposit amount of Rs. 10,000 to become eligible for a credit card.
Can I get a credit card without showing Income Tax returns?
Yes. It is possible to obtain a credit card without an income tax slip. If you are a student, a credit card applicant against a fixed deposit, or a credit card applicant via a primary cardholder in your family, you do not have to show an income tax slip to get a credit card.
What is the rate of interest on credit cards issued against a fixed deposit?
Most banks do not charge any interest on credit cards against fixed deposits as long as payments are made on time. In case of late payment, the interest rate varies between 4%-8%. If you default on your dues, your fixed deposit funds may liquidated to recover the outstanding balance.
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