Credit Card Against Fixed Deposit: Features, benefits and eligibility criteria

Secured credit cards are a viable solution for people with poor or no credit history. These cards help build or repair credit scores over time. Here’s a detailed look at secured credit cards available in India, focusing on their benefits, eligibility criteria, and key features.

So, what exactly is a secured credit card? A secured credit card is backed by a fixed deposit (FD) held with the issuing bank. The credit limit is usually a percentage of the FD amount, often ranging from 80% to 100%. This reduces the risk for the bank, making it easier for individuals with poor credit scores to get approved.

Also Read: SIPs surpass fixed deposits, equities as India’s preferred investment choice

What Are the Key Benefits of Secured Credit Cards?

1. Credit Score Improvement: Regular use and timely payments can improve your credit score.
2. Approval for Individuals with Poor Credit: Easier approval compared to unsecured credit cards.
3. Earn Interest on FD: The underlying fixed deposit continues to earn interest.
4. Controlled Spending: The credit limit is linked to the FD, preventing overspending.
5. Access to Credit Facilities: Offers a way to access credit without the need for a high credit score.

Secured vs. Unsecured Credit CardsFeatureSecured Credit CardUnsecured Credit CardApproval CriteriaRequires a fixed deposit (FD)Based on income and credit scoreCredit LimitLinked to the FD amountBased on income and credit historyInterest on DepositYes, FD earns interestNot applicableIncome ProofNot requiredRequiredCredit Score RequirementLow or no credit score neededGood credit score requiredGlobal AcceptanceYesYesRewards and BenefitsSimilar to regular credit cardsOften better rewards and benefitsUpgrade OptionCan be upgraded to an unsecured cardNot applicableRisk for BankLow (secured by FD)Higher (unsecured) Important Considerations

1. Timely Payments: Ensure on-time payments to improve your credit score.
2. Monitor Credit Utilisation: Keep credit utilisation low to positively impact your credit score.
3. Check Fees and Charges: Be aware of any annual fees, late payment charges, or other fees associated with the card.

Adhil Shetty, CEO of Bankbazaar.com says, “Secured credit cards are a great tool for rebuilding a poor credit score, but unsecured credit cards offer a wider range of benefits. These can include rewards programmes, cashback offers, dining discounts, travel perks, and many more. To make the most of these advantages, it’s important to compare different credit card options and choose one that best aligns with your lifestyle and spending habits.

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