However, in Pakistan, the concept of credit card is still in its early stages. People are accepting the concept and the facilities offered by the product and are thus getting themselves credit cards that suit their budgets and needs. From a job holder to a freelancer in Pakistan, all are now looking forward to having a credit card to help them in their hard financial times. However, the Pakistani community is still with limited knowledge on using a credit card. This is the reason why we have compiled a set of most needed information that is required to be kept handy, if you are a  first time credit card user, you will need to keep these points in your mind to ensure a secure use of the facility offered and not to fall in the black hole of debts.

Being a credit card user, below are the points that you may wish to have known in the first place, to use the credit card in a better way.

Understanding How a Credit Card Works:

First comes the understating about how this financial product works. In simple words, when you buy something with your credit card, you actually pay for it later. It is unlikely a debit card that immediately deducts money from your bank account. While buying with a credit card you actually owe to the bank rather than owing the store. The banks are the one that offers loans to the users for immediate use of the facility to pay them off later.

Thus the credit card will work for you in case you need to change your car tires now, but you are out of cash. With the help of a credit card, you can get things done when you need and pay for them later when you will have money in your pocket/account.

However, it is dangerous if you start buying more than what you can actually pay off.  Because no credit card will offer you the loan for more than one month which means that you will have to pay off the amount that you have lent from bank on monthly basis. If you are unable to do so, you will have to pay an additional amount in terms of interest or fee, apart from the actual amount that you have lent from bank.

Why You Must Have a Credit Card?

If you are good enough to stick to your budget and are able to secure a considerable amount in the name of savings, you may not need a credit card at all.

However, one good reason for having a credit card is that you need to build up a strong credit of financial profile. Although the credit score is not the only contributing factor to your financial profile, it does count much.

If you are looking forward to taking some bigger benefits or help from any financial service providing company in coming future, having a credit card with wisely used services can be of great help. You can use the credit card to make payments and then pay them off responsibly, and things will work magic for you. A good score will have an impact on the chances of getting a loan for your home or apply and get an auto loan successfully.

On the other hand credit card also offers a better level of security as compared to cash or debit card. For instance, if you lose your wallet, you can cancel the credit card easily and can dispute any charges that you didn’t make. But if you lost your cash, it is probably gone forever.

Expert Tips on Using Credit Card:

Here are some of the expert suggested tips to keep in mind while you are opting to use your first credit card wisely.

• The credit card issuing bank is lending you money for a specific time period and after that, you will have pay additional amount as an interest on the actual amount to be paid.
• Never tend to have more than one credit card at one time.  
• Based on how you are intended to use, try to keep the credit card limit as low as possible.
• When buy anything using your credit card, make sure to pay off the balance within a month. It will keep you safe from paying service charges and will also help you build a good credit record.
• Prefer to use a credit card only for emergencies focus on using a debit card, cheques and cash for making most of your payments.
• Never ever give your credit card to anyone else. Because the end, it is you who is responsible to pay off all the charges.
• Keep a proper track of where you used your credit card and how much amount you paid using it.
• Even if you are using the card for emergencies, make sure that it is in an active condition. You can do that by making small purchases in every 2 to 3 months. However, make sure you are paying off the balance before the due date
• Do not let your credit card spending cross 20% of your net income per month. Create a budget and stick to the plan.
• If you think or find that you are not able to handle your credit card wisely, it is better to get rid of it.

Using a credit card is a skill anyone can have, However, self-control is the key to use from a credit card. If you are able to keep a control on your spendings, you can use the credit card and can earn benefits.

Khurram Zahid

The post A Quick Guide for First Time Credit Card Users in Pakistan appeared first on Smartchoice.pk.

Credit cards are still in the process to gain some momentum. If, you are thinking to apply credit card from 12 major banks in Pakistan. Then don’t forget to keep in mind some of the major factors that will lead to rejection of credit card application.

Related: Want your First Credit Card? These Requirements from Banks you Need to Know

Here, we will discuss top five reasons that predominantly lead to non-acceptance:

1. Your credit history isn’t so impressive!

When banks issue credit card, they look into your credit history. Your debit- to credit ratio needs to be healthy. Most of the banks in Pakistan will refuse the application due to delayed payments. Keep this ratio low so the issuing bank is comfortable lending you money.

Normally, banks look into your ECIB report. Electronic Credit Information Bureau is central database created by state bank of Pakistan. This report provides the information about the individual’s history of lending offered by banks. That’s not it; this tool also gives complete information about your payment schedule and burden on your income with respect to your monthly installments.

Banks rarely give you credit when you need the most. Keep your report clean by filing your income tax, timely payment of loan installment and finally, paying credit card bills within the grace period. Take advantage of good credit lines when you are flying with best credit scores!

2. Expenses more than your monthly income

The Income statement is a reflection of your financial progress. Banks don’t do business with you infect they invest in your income statement. If your expenses are more than income then banks will barely look into your application. According to Forbes, your credit score is not enough to win you a bank card.

Your income is the key for approval. It’s quite obvious, “who will sit in a sinking boat”?
According to Socio-Economic Status of Pakistan, 15% and 25% Pakistanis falls in the category of rich and upper middle class.

Source

The picture explains, why credit card is still not a popular payment instrument in Pakistan! Banks/DFI’s have market of 40 million of Pakistanis. Almost 130 million people don’t have enough resources to repay the loans.

State bank of Pakistan has issued clear instruction in this regard. There is a complete manual regarding operational guidelines for credit card business in Pakistan. In this guideline, chapter 2.5 instruct the Banks/DFI’s to properly assess the credit history before issuing credit card to any applicant. Normally, the risk department or compliance department is responsible for customer financial evaluation.

Related: 5 Top Banks Offering Credit Cards in Pakistan

3. False credentials

Don’t try to mislead your bank it may cause legal consequences to you. Especially in the situation when your business is going down and you wind up with debts you can’t pay. Misleading information results in two possible ways. First, the customer deliberately tries to overstretch its income statement to get hold of a credit card. Secondly, the illiteracy rate in Pakistan is drastically low. Consequently, people are not aware how to give accurate information to the banks.

According to Pakistan bank association, Credit card Pakistan has recorded the highest default rate since its arrival. It is considered as the most unsecure mode of financing because of no security from the borrower. Still, People consider it as a luxury facility and hold two to three credit cards at the same time.

KYC (know your customer) policy helps the banks/DFI’s to verify customer income, phone, postal address and other relevant details. Try to give accurate and updated information to the banks. Once, you will be caught red- handed then it will be difficult to get out of the bank “clutches”.

4. Too many credit lines

Have you availed too many credit lines in a recent time? This practice will affect your credit profile. Too many hard inquires will categorize you as a riskier borrower. Further, it will clearly indicate that you need loan due to financial setbacks. Analyst suggests that, if you are an active credit card user then focus on building credit history with one or two cards. Keep your debit-to-credit ratio below 30%. None the less, it is a wise decision to avail credit with low interest rate but keep it for short period of time.

Banks/DFI’s can sanction limit up to Rs 5,000,000 to their prime customers on the basis of their track record, credit worthiness and financial position. Try to focus on your sending habits rather than focusing on the credit limits.

5. You are too young to apply credit card

You can apply for credit card if you have crossed the 18 year age limit. It also simply means that you should have National identity card issued by NADRA. Furthermore, bank may approve your application as a minor but Pakistani law doesn’t allow taking legal action against a minor. But, banks will not take this risk in case you get default.

However, you can get the card under the age of 18. In that case, you parents will require to co-sign the application. There is a risk involved in that case too, any negative activity will appear on both primary and authorized users.

Related: How to Enjoy your Credit Card without Going into Debt

Final words

Both, commercial and Islamic banks haven’t shown interest in consumer financing in last decade or so. The primary reason is the borrower guarantee. The same factor has affected the credit card business. Credit card in Pakistan has limited market. Banks prefer to target a specific segment of Pakistanis.

Lenders, regulatory authorize and more importantly customers need to be more responsible and rational. As Charlie Munger said,

“Don’t let your credit card debt take over; you can’t get ahead paying the eighteen percent”

Khurram Zahid

The post Top 5 Reasons your Credit Card Application can get Rejected appeared first on Smartchoice.pk.

Everybody now needs a credit card.

You will be amazed to know that to apply for a credit card these days is as simple as participating in one of those online surveys; entering your information and hitting “submit.” But getting approved is another business entirely. One that requires careful planning that should start long before you apply.

Are you trying to make your first credit card? Well, you have come to the right place. In this credit card 101, you will find out how you can go about having one made for yourself, and what your bank might require from you.

Also read: Most Rewarding Platinum Credit Card in Pakistan

First and foremost, here is what you must know:

1. Reduce your debt

Most of the time, people with bank loan history are denied credit cards. Make sure you have none before you proceed to apply for a credit card.

You are supposed to ensure that you have no debts before you apply. If you do, try to pay off your debts prior to the application process.

2. Don’t apply for the first offer you see

Falling for the first offer you find yourself or through some other source has its disadvantages. It does people good to compare between offers and the banks offering them.

In Pakistan, however, you can apply only where you have an active account. Even with this, there are more than one offers. We recommend talking this out with the bank people.

Let them help you out. They will know what is best suited to your needs.

3. Include all of your income in the application

Your income, and all of it, is an important aspect of this entire process. Credit card issuers will want to know your income level to compute your debt-to-income ratio, which in turn will aid them to determine your capability to pay.

If you have more than one employer, more than once source of earning money, like earning apart from your full-time job or the like, be sure to include all of it on your application so as to avoid future confusion.

Another thing of note, upon providing incorrect information, whether intentional or not, about your income might lead to credit card fraud. The only way out of this mess is to pay your way out.

Also read: 5 Tips To Save Money Using Your Credit Card!

Secondly, what you must present:

1. Identity Documents

Usually, they’ll want a CNIC with your photo, or your passport. Make sure that you present valid originals of these documents.

They should not be tattered or crumpled.  

2. Proof of Income

Your credit card issuer would need some proof income. This includes a salary slip, a letter from your employer, and your bank statement can testify to this. Anything that holds validity and proves that you have a constant, trustworthy source of income to pay off your credit card loans.

The documents being presented should be in their original form and not crumpled or folded.

3. Proof of debt if applying for balance transfer

This varies with your case. If you qualify for this one, make sure—again—that the credit card statement you provide is recent and not old, the document being neat and creaseless.

Also read:  6 Common Type of Credit Card Frauds and How to Avoid Them

4. Decide on a type

A credit card is categorized into Silver, Gold, Platinum categories. The names may differ from bank to bank. But their purpose is similar. Credit You need to choose your credit card based on your salary. If your amount doesn’t coincide with the policies of your chosen card and the minimum salary requirement, then your application will be rejected.

Make sure you choose your card appropriately with your salary.

5. Cards with higher credit limit

As per the rules and policies applied and abided by here in Pakistan, the limit your credit card can have can be three times that of your salary. For instance, if you earn 50 thousand rupees a month, then your limit can be three times of that amount, that is 150 thousand rupees. This is offered by the Gold Card.

The Silver Card offers a limit that is two times of your original salary.

9. Multiple cards and what you need to know

If you apply for more than one card with a number of banks, this reduces your chances of approval. This is usually restricted to cards with higher limits.

However, if you wish, you can apply for multiple cards with less limits to have a higher cumulative limit. Caution is advised in this case. One must know the total lending limit of each card to avoid trouble.

Information you need to put in your application form.

This depends upon your credit card issuer. But almost all of the following information is asked of you. Generally

• Full name
• Date of birth
• Residential address and status—status being either citizen, permanent resident, long-term visa, et cetera
• Contact details—this should include your email address, as well
• Number of dependents—dependents are your children
• Occupation
• Employer’s name and contact details
• Income per year—this shall include annual salary, bonuses or commissions, and secondary income et cetera
• Current balance of your savings and transactions accounts
• Current balance of other credit cards and other debts you already have
• Monthly expenses—this shall include rent, mortgage, groceries, fuel or public transport, utilities, insurance, and possibly more depending on your issuer
• Your preferred credit limit for the card—this one is usually optional
• Any other general information asked of you

Bottom Line and Conclusion. 

1. Being cautious

You need to be cautious when it comes to filling your application. One mistake, even if it is a minor one, can lead to your credit card application being denied. You need a clear head and possibly another person well-versed in finance or a relative having relevant experience with dealing with credit cards to help you fill your form.

2. Don’t give up

In case your application ends up being denied, there is room for consideration. This is practiced by a lot of credit card issuers. You can call them and talk it out. Plead your case and see how it goes.

Concluding, abide by the rules needed to get yourself approved the first time. Do not make haste, as this process will cost you time. Also, make sure to give accurate information during the application process so as to avoid denial.

If you go by the books, you will have your credit card assigned to you. There is always a second try if that doesn’t work out.

Khurram Zahid

The post Want your First Credit Card? These Requirements from Banks you Need to Know appeared first on Smartchoice.pk.

Most banks that offer credit cards make sure to include Platinum card in the lineup. Corporations, particularly senior management, often use Platinum cards for the benefits they provide. It is often difficult to choose the best one from the options available, so we have compiled a list of Platinum cards provided by various banks in Pakistan and list down their rewards.

Note: The details have been taken from websites of the banks. Some facilities are equally provided by all banks to Platinum card holders such as high credit limits, personalized banking and VIP customer service. It’s the other facilities such as reward points and discounts that make the difference. In this blog we are covering these rewards so that readers can compare the cards and make a more informed choice.

Standard Chartered Bank Pakistan

Visa Platinum

• 5 reward points for every Rs. 200 (redeemable points)
• Concierge services

Bank Alfalah

Visa Platinum

• Discounts (Such as 20% off at Lal Qila, Pappsalis, Tuscany and Little China)
• 1 fortune point for every Rs. 50 (redeemable points)
• Concierge Services
• Priority Pass*
• Free CIP Lounge Access

Faysal Bank

MasterCard Platinum

• Shopping/dining discounts (Such as 25% off at Chung Pa and Cafe CZ)
• 1 reward point for every Rs. 200 (redeemable points)
• Double reward points for international spending
• Free CIP Lounge Access

MCB

Visa Platinum

• 1 reward point for every Rs. 50 (redeemable points)
• Triple reward points for international spending
• Priority Pass
• Free CIP Lounge Access
• 20% on selective local restaurants (such as Cafe Aylanto, Cafe Flo and Papasallis)
• Exclusive local discounts (such as 40% off on diamond jewelry from Almas Jewelers)
• Concierge Services
• Visa international discount offers

HBL

Visa Platinum

• Discounts (25% off at Nike, Charles & Keith, Pedro and Tag Huer)
• Free CIP Lounge Access
• 1 reward point for every Rs. 25 (redeemable points)
• 5x reward points for foreign currency transactions
• Visa international discount offers

UBL

Visa Platinum

• Discounts
• 1 reward point for every Rs. 50 (redeemable points)
• Triple reward points for international spending
• Free access to Shapes Health Club
• Free CIP Lounge Access
• Visa international discount offers

*Priority Pass is the world’s largest independent airport VIP lounge program and allows Platinum Card holders to use lounge facilities while they wait for their flights.

Conclusion

The platinum credit cards of all banks provide massive benefits but HBL’s Platinum Credit Card makes a stronger presence than most. The sheer number of rewards & benefits overshadow others, particularly 5x points for foreign transactions and reward point on every Rs. 25 shopping.

MCB seems to be close second, with some great discounts and priority pass. Some banks, such as Silk Bank and Allied, do not have dedicated information pages for the Platinum cards and thus we were unable to find details of their offerings.

While the rewards sound great, the real benefit of Platinum Cards is the personalized banking and access to lounges on airports. For frequent travelers these are like heaven and the better the options for redeemable points, the more beneficial Platinum card gets.

The choice of Platinum Credit Card should be based on multiple factors, keeping one’s lifestyle in mind, and the benefits of the card will enhance the shopping experience.

Khurram Zahid

The post Most Rewarding Platinum Credit Card in Pakistan appeared first on Smartchoice.pk.