The demand for credit cards in Germany increases from year to year. But it is not uncommon for the credit card application to be rejected. What can you do if the application is rejected and what are the alternatives? See seasonsubmit.com for a write-up
Statistics: Credit card applications are often rejected
If the application for a credit card is rejected, the first thing to do is to keep calm. Rejections are not uncommon. Some providers reject up to 60% of all applications. Initial applications in particular are particularly often affected.
This shows two things: First, banks and card providers have relatively high requirements for them to spend the plastic payment method. This is often underestimated. Secondly, as a result of the underestimation, errors occur in the application.
It is therefore important to research the reasons for the rejection. Based on this, an application can then be made to another bank. Unfortunately, most financial institutions do not communicate transparently, which is why they refused to apply for a credit card. Even direct demand does not always bring the desired clarity. It is therefore often important to become more active yourself.
The most common reason for rejection: the credit rating
If an application for a credit card is rejected, the Credit bureau is often problematic. It contains a negative entry or the bank rates the score as too weak . The Credit bureau is something like a history book about the creditworthiness of a person in the past years. It shows whether there have been payment problems in the past. Donors therefore attach great importance to it. If Credit bureau raises doubts, a credit card will not be issued.
Another reason: the income is not regulated
Students, housewives, housewives and pensioners as well as the self-employed or freelancers also experience rejections. The reason for this is that there is no regular income that could serve as security for the loans granted through the credit cards.
Students and people who look after the household generally have no pay at all. Many pensions are below the statutory garnishment exemption limit, which makes banks too risky. The self-employed and freelancers have to deal with irregular earnings. It has been proven that your business has to go well for several years to receive a credit card.
An application for a credit card is rejected even if the amount of income is insufficient. This means that the loan limit is higher than what is secured by the monthly payments. Most banks have problematic guidelines in this regard.
For example, some financial institutions work with a simple rule of thumb: the amount of the monthly net salary corresponds to the maximum credit line. Other financial institutions are less generous and only set 50 percent of their net salary.
Credit card application rejected: what can you do?
Without regular income and / or with a negative Credit bureau, you cannot get a classic credit card on your own. In such a case, only a guarantee can help. A person with a strong credit rating signs that he will vouch for the credit card debt when in doubt.
Things are different in the third case. Rejected cardholders can apply for a credit card at another bank and should ask in advance how the loan framework is calculated. You adjust your request accordingly.
Prepaid credit card as a recommended alternative
If you do not have a guarantor but need a credit card, a prepaid variant is a recommended alternative. It is awarded without checking the Credit bureau. The cards work with credit and do not actually give credit. This means that only the money that was previously loaded can be spent.
Otherwise, prepaid credit cards behave like normal credit cards. So users can pay in the store or on the Internet. It is also possible for them to withdraw fresh cash from the ATM within the limits of their credit.
The prepaid credit card has other advantages: The owner of the payment medium, for example, retains full cost control. He can easily set a budget for a vacation, for example, by loading the card and does not risk carelessly spending more than originally planned. The prepaid credit card is therefore also suitable, for example, for giving it out as a parent to minors who should not leave the house without “emergency nest egg”. If the prepaid card is also lost or stolen, the consequences are less dramatic. The maximum amount of credit loaded is at risk if the card is misused.
There are two things to consider when choosing a prepaid credit card: First, is interest paid on the credit? Second, how much is the annual fee? Significant savings are often possible via a price comparison.