What does the bank look for when issuing you a credit card?

  • author Abishek R
  • 07-02-2022
Cardnomics is written by credit card industry professionals which helps you to take more informed view about credit cards.

At Wizi, we’ve been working with many banks (I’ll call them card issuers henceforth) for acquiring new customers for them.

One of the things that we see across card issuers is how they decide which customer they should issue a credit card? This is called underwriting in banking parlance.

So, here’s our understanding of how they issue cards to you.

Credit cards are open-ended products so they look for predictable customer behavior of a customer

In my last article, we’ve seen how credit cards are open ended products - which means the issuer has to protect themselves from exposing their predictable behavior.

To address this, card issuers look at who they want as customers.

Salaried customers offer better predictability

If you are salaried, you already have better chances of getting a credit card.

If you look at the card industry statistics - it is extremely skewed towards salaried individuals - 86% of the card users are salaried customers! This is largely true for most card issuers.

Credits: Macquarie Research data for SBI IPO

Preference order: Salary account > CAT A, B companies > Existing card holders

If you are already maintaining a salary account with a bank for at least 6 months, your chances of getting a credit card is higher.

If the company you are working with is categorized as a good company by the issuer, typically CAT A, B, C, it may be favorable for you to get a card.

If you are already an existing credit card holder - the easiest way to get a new one is through your current card statement.

idea points

Credits: Macquarie Research

Location stability & collect-ability matters

While the job market is making people move places more often and pandemic is getting people back to their home town - it has become a real bone of contention with policy makers as to how to account this factor.

Traditionally - if you are in the same location for many years, then the chances are that you may be committed to building your life in that location/ city/ town for which you would have developed stability in the process.

Card issuers look if you’ve stayed in the address for a long time using various proofs: giving the same address to the employer, to the utility bills, to government proofs, etc.

Every card issuer has a collections team. They have their own strengths and gaps on which kind of customers they can collect the money in case things go wrong.

This is also part of the underwriting process - issuers ask, “Can I collect effectively the unpaid dues from this person?” - if not they don’t issue a credit card.

This is also the reason why certain professionals like Police, Lawyers, Chartered Accountants don’t get credit cards easily. This is because the issuers find it difficult to collect money from the above-mentioned professionals.

Are you part of any blacklists, or do you have any cases against you?

Every issuer maintains a blacklist of customers - this would be across products which is maintained as a single database.

On top of this, they also look for a global database and litigation database for a match from service providers.

Final word on that, do not try to fudge your salary information - it will not go in your favor for future loans.

There are 20+ ways to get a credit card beyond salary, more on that later

At Wizi, we’ve been working with card issuers to look beyond salary slips to underwrite customers and guess what - there are more than 20 different ways one can get a credit card.

We will detail out each of them in our later posts.