Instant approval credit cards, as the name suggests, promise a swift application process and rapid card issuance. Unlike traditional credit card applications that often involve paperwork, verification processes, and waiting periods, instant approval cards are a convenient and efficient way to access credit quickly. While the approval process might be quicker, applicants are still subject to credit checks and evaluation of their financial history. Therefore, if your credit score is not up to the mark, you might face rejection or unfavourable terms.
It is important to know your credit score and ensure that you have not defaulted or delayed your payments recently before you apply for any credit card to avoid disappointment. You must also understand the terms and conditions of the credit card and avoid applying for it just because it is readily available to you.
You must also check the annual fee, reward points, and penalties. Additionally, checking whether the card suits your spending pattern will make it useful for you to use it as per your requirements. It’s recommended to opt for a card with competitive charges and delay penalties to avoid exorbitant costs.
Individuals must set a budget and stick to it. They should use the card for purchases that they can afford to pay off in full each month. They should pay the bill on time and not carry a balance from month to month.
Reward points and benefits
Some cards might come with introductory offers and rewards, which could not be useful for you. For example, a card offering reward points primarily on hotels and flight bookings may not be useful for someone who rarely travels in a year. Awareness of the usefulness of your credit card is essential for responsible credit management.
Rewards and benefits can significantly enhance the appeal of a credit card. Some instant approval cards offer cashback, travel rewards, discounts, and other perks. Evaluating these offerings and aligning them with personal preferences can make the card ownership experience more rewarding.
Adhil Shetty, CEO, Bankbazaar.com, says, “Credit cards offer a variety of rewards, such as cash back, points, and miles. You can earn rewards for every transaction, which can be redeemed for travel, food, shopping etc. These benefits can save money and help you maximise your credit card benefits.”
Annual Fee
While some instant approval cards may boast of no annual fees, others might levy substantial charges. Cardholders should evaluate whether the benefits and rewards offered by the card justify the annual fee.
Lower credit utilisation ratio
There is a possibility of having a lower credit limit initially on these credit cards. While this can discourage excessive spending, it’s also crucial to keep credit utilisation ratio in check. Maintaining a low credit utilisation ratio (CUR) is vital for a healthy credit score. Timely payments are equally essential, as delays can result in high-interest charges and negatively impact creditworthiness.
Shetty explains, “One of the significant reasons to maintain a low CUR is its impact on your credit score. Credit bureaus calculate credit scores based on various factors, and your CUR is one of them. A lower CUR demonstrates responsible credit usage and positively affects your credit score. A higher CUR can indicate to lenders that you might be reliant on credit and could be facing financial difficulties.”
Key things to keep in mind
Credit score: The higher your credit score, the more likely you are to be approved for an instant approval credit card with a lower interest rate and fees.
Income: The lender will want to see that you have enough income to make the monthly payments.
Employment history: A stable job history will ensure that you are a safe customer for card issuers. They would like to quickly approve your card if you have maintained a clean credit record.
Debt-to-income ratio: If you have a manageable amount of debt, it is possible that your chances of getting a credit card instantly is higher. The more the debts, the fewer are the opportunities for you to get approved for an instant approval credit card.
The instant approval credit cards offer a swift and convenient way to access credit. However, you must perform your due diligence before accepting the offer. Comparing interest rates and fees and practising responsible credit management are paramount. If used judiciously, instant approval credit cards can be valuable financial tools.
IS IT FOR YOU?
- Approval process may be quicker for instant approval cards, but credit checks & financial history are essential
- While some cards may boast of no annual fees, others may levy substantial charges
- These cards may have a lower credit limit initially