Credit Cards for Self-employed Individuals

It can be difficult managing your finances as a self-employed individual. One of the key aspects is managing cash flow, and this is where credit cards are considered as a valuable financial solution. They offer flexibility when managing expenses, provide rewards, and even help with building a strong credit profile. Choosing the right credit card tailored to your financial needs requires careful consideration.

Managing your finances as a self-employed individual in India requires the right financial tools. Here are some credit card options that offer valuable benefits:

Disclaimer: The fees and benefits for these credit cards are subject to change at the issuer’s discretion. Check the issuer’s official website before applying.

Self-employed individuals often face unique challenges such as irregular income or unexpected business expenses. Having a credit card can help cater to these specific needs in an effective manner. Here are some of the benefits of credit cards for self-employed professionals:

Managing Cash Flow

Self-employed individuals may experience fluctuations in their income, which makes it difficult to manage expenses. A credit card allows them to cover additional expenses such as office supplies, utilities, or any client-related costs. This can help keep operations running smoothly during months when cash flow is limited.

Interest-free Credit Period

Most credit cards offer an interest-free credit period of up to 25 to 55 days. This allows self-employed professionals to make purchases without impacting their immediate cash flow. This facility comes in handy when managing short-term cash flow gaps.

Building Credit Score

Using a credit card responsibly by paying bills on time and maintaining a low credit utilisation ratio can help build a strong credit score. A good credit score can help you get approved for other forms of credit, such as loans and credit cards, with ease. A strong credit score makes you appear creditworthy to issuers.

Rewards and Cashback Offers

Most credit cards provide cashback, reward points, and discounts on business-related purchases. These expenses can include travel, fuel, or even office supplies. These additional reward points can help reduce expenses and maximise savings.

Flexible Repayment Options

Some credit cards even offer the option to convert outstanding balances into Equated Monthly Instalments (EMIs). This helps with repaying larger amounts in smaller, more manageable payments over time. Self-employed professionals can manage their budget efficiently with these EMI options.

Higher Credit Limit

One of the primary benefits of a credit card is that it grants you access to higher credit limits. This can allow you to infuse cash into your venture, streamline cash flow shortages, or even tackle large business expenses.

Before applying for a credit card for self-employed individuals, it is important to go through the eligibility criteria, as these may differ from one issuer to another. Here are some of the common eligibility criteria that need to be met:

• You must be at least 21 years old

• As a self-employed individual, you must meet the minimum annual income threshold prescribed by the issuer

• You must be an Indian citizen with a permanent residential address

• You must have a credit score

• Having an existing relationship with the bank, such as a savings account, current account, fixed deposit, or business account, can help improve your eligibility

When applying for a credit card as a self-employed individual, you will need to submit a prescribed list of documents. Ensure that you have these documents ready along with your application form to avoid any delays or rejections. The documents may differ from one issuer to another. Here is a list of general documents required for a credit card:

Identity Proof (Any one of the following)

• Aadhaar Card

• PAN Card

• Passport

• Voter ID

• Driving Licence

Address Proof (Any one of the following):

• Aadhaar Card

• Passport

• Utility Bills (Electricity, Gas, or Landline)

• Registered Rental Agreement

Income Proof

• Income Tax Returns for the last 2 to 3 years

• Bank statements for the last 6 months

• Audited profit and loss account and balance sheet 

Proof of Business

• Business registration certificate, such as a GST Certificate, MSME Certificate, or Shop Act Licence

• Trade Licence

• Partnership Deed

• Articles of Association and Memorandum of Association

These days, the process of applying for a credit card is digital and can be done from the convenience of your home. Here are the steps to apply for a credit card as a self-employed individual:

1. Compare different credit card options available in the market and shortlist one based on the rewards, benefits, fees, and other factors

2. Visit the provider’s official website

3. Head over to the credit card section of the website

4. Fill out the application form with the mandatory details

5. Submit the documents required by the issuer

6. Submit the application form to complete the application process

The issuer will thoroughly review the documents and details you have submitted and conduct a verification before approving the application. A representative from the issuer’s end will get in touch with you for further processing.

Applying for a credit card as a self-employed individual requires research. Each issuer assesses the customer’s financial stability differently, hence it is important to keep the following things in mind before applying:

Compare Options

It is important that you compare the different credit card issuers available before applying. Understand the benefits, fees, application process, documents, and eligibility criteria before applying. A rejection of your credit card application can have a negative impact on your credit score, so it is best to ensure that you are prepared to increase your chances of approval.

Avoid Applying for Several Credit Cards

In case your credit card application has been rejected, it is best to avoid applying for another one immediately. Multiple applications in a short period of time can have a severe impact on your credit score. Understand why your application was rejected and take corrective measures before applying again.

Building a Strong Credit History

An issuer will thoroughly scrutinise your credit history when you apply for a credit card. This credit history gives the issuer insight into your credit behaviour as a whole. Ensure that you have maintained a strong credit score by making timely payments and managing your existing credit accounts responsibly. A strong credit history will improve your chances of getting approval.

Fees and Charges

Every credit card is accompanied by a list of fees and charges such as joining fees, annual fees, finance charges, late payment charges, and other charges. Ensure that you are aware of these charges and determine whether the benefits outweigh the cost. Consider applying for a credit card that offers an annual fee waiver or welcome benefits.

Responsible Usage

A credit card is an effective financial tool that can help you build or damage your credit score. Make sure that you are responsible with it. Make timely repayments, keep your credit utilisation ratio below 30%, avoid unnecessary debt, and clear your dues on time. Using your credit card in a financially responsible manner can help you boost your credit score.