If you are a low income earner, it's unlikely the cards you'll qualify for will earn rewards like frequent flyer miles or travel benefits. Features to look for include a manageable credit limit, low interest rates and low fees — ideally none for the likes of a late payment.
David Boyd, co-founder of Credit Card Compare, explains, "Before applying for a credit card, check what its eligibility criteria are. Where possible, we try and make it clear how much income is required to be eligible on Credit Card Compare. The more features a card has like earning rewards, travel insurance, and lounge access, the higher the minimum income tends to be. Do not risk applying until you know you earn enough to qualify and that you can prove it. If in doubt, contact the issuer first, confirm how much income is needed, check your credit report, and then apply."
Key features of low income credit cards
- Lower credit limits: Low income credit cards generally have lower credit limits than standard credit cards. This helps cardholders manage their spending within their financial means.
- Basic features: Low income credit cards may offer basic features such as online account management and fraud protection.
- Opportunity to build credit: By using a low income credit card responsibly, individuals can build a positive credit history, which can be beneficial for future finance applications.
Benefits of low income credit cards
- Financial inclusion: Low income credit cards promote financial inclusion by providing access to credit for individuals with limited incomes.
- Credit building: Responsible use of a low income credit card can help individuals establish or improve their credit score. This is critical for getting a regular credit card or for applying for various types of loans.
- Financial management: These cards can assist individuals in managing their finances and covering unexpected expenses and emergencies.
Andrew Boyd, co-founder of Credit Card Compare, shares, "Getting a credit card isn't just useful for everyday spending. It can be used to build up your credit score. Having a good credit score is important because it opens the door to a range of financial opportunities in the future such as buying a car or home."
What to consider when choosing a low income credit card
- Interest rates: Compare the interest rates of different low income credit cards to understand the cost of borrowing. Allowing a balance to build up is best avoided, but if you do need to use the credit facility, a lower rate is better.
- Fees: Consider the annual fees, late payment fees, and other charges associated with the card. The lower they are the better off you will be as a card user.
- Rewards and benefits: Very few credit cards for low income offer rewards or benefits despite the lower income threshold. If they do, the earn rate per dollar spent is likely to be on the low end.
- Credit limit: Assess whether the credit limit offered meets your financial needs without encouraging overspending.
How to apply for a low income credit card
- Research: Compare different low income credit card options available on the market.
- Check eligibility: Ensure you meet the minimum income requirements specified by the card issuer.
- Check your credit report: Look for recent late payments that may influence the bank's decision.
- Gather documents: Prepare necessary documents such as proof of income and identification.
- Submit application: Complete the application process online or in person, providing accurate information.
- Look out for follow up requests: The bank may need to speak with you to clarify details or need more documentation.
