Some credit cards offer an ‘instant decision’ or ‘instant approval’. In other words, you might apply for a credit card and receive a yes or no answer within minutes if you apply online.
Getting an instant decision on your credit card application sounds great in theory - no waiting around for follow-up letters or calls to find out if you have been accepted or not.
However, the term 'instant decision credit card' can be somewhat misleading. While some applicants may get a decision inside a minute or so, many people will not. Whether you receive an instant decision depends on a number of factors, including the provider’s own approval criteria and your personal financial circumstances.
Usually you will apply online for the credit card, and you will receive an answer back online too. The process of deciding whether you will be approved tends to be based on credit scoring.
Credit scoring is a measure of how credit worthy a lender thinks you are, based on a picture of your current financial circumstances. In order to build up a credit score, the lender will use information from a credit agency.
The score takes into account what existing cards, loans and other debts you already have. It also examines how you manage your finances in terms of repaying credit, and whether you have had any arrears on your loans or had any form of credit refused in the past.
With a normal credit card, you may have to wait a few days before you hear whether your application has been successful. Also, you will need to sign the credit card agreement before the credit card is posted to you.
Since COVID-19, many lenders have made the application process for credit cards quicker and easier to do online, and have enabled people to sign the agreement online, rather than having to come into a bank branch.
With an instant decision, you will receive a yes or no quickly. With a normal credit card the lender may want to make additional credit checks, or contact you in person to discuss your application.
If you are approved, you should receive your card within a week or two. So although you might receive a quick decision on whether you can have the card, it will still take time for it to be posted to you. You will not have access to the credit until the card arrives.
For this reason, although approval might be quick, this does not mean that the opportunity to use the credit available is instant. There are quicker ways to access credit in an emergency, such as talking to your bank about extending an overdraft or asking your existing credit card provider for a temporary increase in the credit limit on your card.
Eligibility for credit cards depends on your personal financial circumstances and your credit rating. It also depends on how much potential credit you already have, and whether you have made a lot of recent applications for credit.
Your credit score will show whether you have made a lot of recent applications for credit. If you have, this could count against you, because it can make you appear desperate for credit. For this reason, if you are thinking of apply for an instant decision credit card, make sure you do not make lots of applications in a short period of time.
Some instant decision credit cards may not offer the most competitive interest rates, which are referred to as APR or AER rates. For this reason, it is better to shop around to look for the best credit card for your needs, rather than the credit card that promises a quick decision.
If you want a credit card and plan to pay off the outstanding balance in full each month, then you do not need to worry too much about the card’s APR. However, if you think you might not pay off the balance in full, then the APR and interest rate are very important. The higher the APR, the more you will pay in interest, and potentially, the longer it will take you to pay off your credit.
Therefore, think carefully about how you plan to use a credit card before you apply. That will help you when you are shopping around for the best instant decision credit card to decide whether it is in fact the most suitable product for your current financial needs.
You could receive an instant decision on your credit card application if you have a good credit rating and a good income, or if your credit profile exactly matches the profile of a particular card.
This is because it is fairly simple for pre-application or 'soft credit check' tools to examine basic details and make a decision.
However, it's often difficult for credit card providers to make a judgement about whether to approve a card on the back of a quick 60-second check, meaning your application may need to be referred for further checks before you get a decision.
Essentially, when a credit card provider lends money it's taking a risk that you may not pay it back.
Credit scoring helps providers work out the level of risk for each person who applies by checking previous credit information and using it to decide how much can be lent and at what rate.
Many big credit card providers now offer pre-application check services on their websites to help provide a quick decision on your credit card application.
These tools perform what is called a 'soft footprint' check on your credit file to give you an idea of whether you will be accepted before going ahead with a full application.
While not the same as being firmly accepted, these checks will not affect your credit report or your credit score.
If you are unable to find the right credit card, pre-paid cards can be a great alternative as they offer the convenience of a credit card without the risk of falling into debt.
And because there is no credit checks, pre-paid card are truly 'instant decision', with less chance of being rejected.
Alternatively, if you are unsure of where to begin looking, try comparing credit cards for people with limited or bad credit histories.
There are a number of potential reasons for this:
If you have missed any payments - this could have made a mark on your credit report and make you look unreliable to a potential lender. This could be anything from a loan or credit card repayment, mobile phone contract or missing a mortgage payment.
You are not registered on your local electoral roll
You have financial ties to someone with a bad credit history
You have a lot of potential credit – a lender will also take into account how many bank accounts you have and how much debt you currently hold or credit you could use.
You may also be victim of not even having a credit history - good or bad or of identity fraud.
Many young people struggle to get their first credit card as lenders do not have a financial history to compare.
If you are keen to reap rewards when you spend but are restricted by a bad or non-existent credit rating, the good news is that there are still cashback cards available to you. These are not nearly as rewarding as others on the market though, so your priority should be to rebuild your credit rating to make yourself eligible for these more competitive cards in the future.
To rebuild your score you will need to use your credit card regularly, never missing a payment and always staying within the limit.
Use your cashback card to get a small reward for repaying in full every month while you work towards rebuilding your credit rating. Only get these cards if you can pay the balance off in full every month as the interest rate is likely to be higher than standard cards.
If you end up building up debt on these types of cards you could wipe out any cashback gains you might have made and risk landing yourself deeper in debt and damaging your credit rating further.