Credit cards help in making quick and straightforward transactions. Some credit cards also offer interest-free emergency loans, interest-free ATM withdrawals, and conversion of transactions into EMIs in addition to credit purchases.
For everyone, particularly those who are more extravagant than others and want to distribute their spending equally without hindering their monthly savings, credit cards are a blessing. Yet not everyone is eligible for a credit card, and that’s where fixed deposit credit cards come to the rescue or also known as ‘secured credit cards’.聽
Read on to learn the details about credit cards against FD and how to get them.
What is a secured credit card or a credit card against FD?
- A secured credit card is backed by collateral and is provided to clients with a low credit score or to those with no credit background. Banks offer these types of cards to those clients who are trying to build their credit profile with secured credit cards.
- A credit card against fixed deposits is one of the standard versions of a secured credit card.
- A credit card against FD is provided to clients in return for a fixed deposit deposited as collateral for the card.
- Based on the value of the fd that a customer can commit, the credit limit on a secured credit card is determined. Card issuers offer up to 80 percent of the fixed deposit value as the credit cap in most situations.
Features and advantages of a credit card against FD
- As issuers need you to request limited paperwork, a credit card against FD is simple to apply.
- You are expected to guarantee a fixed deposit that satisfies the minimum value requirement as prescribed by the financial institution to apply for this secured credit card.
- Issuers ask you to promise an FD with a minimum tenure of 6 months.
- The limit of a credit card against FD is typically 75 percent to 85 percent of the amount of a fixed deposit.
- A credit card against FD usually includes all the regular characteristics like reward points and cashback.
- Since a credit card against FD has a low credit cap, you can use it by using it carefully to build a positive credit score. When your salary grows, this will help you transition to a daily credit card on competitive terms.
- Repayment of the secured student credit card begins once the course is completed and you have got a job.
- If you pledge your fixed deposit to the credit card lender as collateral, you continue to receive FD interest at the applicable rate.
- The credit cap is not determined by the bank but depends on the amount of the client’s FD deposit.
- Since the card is backed against an FD, the fee of the card is very low or zero.
- Income proof is not needed.
- No tedious documentation
What are some of the disadvantages?
While credit cards issued against one’s fixed deposit are a blessing for those who fail to get one otherwise, there are some constraints as well:
- The credit card-linked FD is no longer a liquid asset, meaning that it is difficult to use such an FD for early withdrawal.
- If unpaid dues are not paid, the bank will take over the FD.
- The credit score drastically diminishes if one fails to pay the dues.
How to avail a secure credit card?
You are expected to have a fixed deposit with your chosen lender to apply for a credit card against the FD. Applicants can apply by visiting a branch or through the issuer’s website if you already have an FD with the issuer.
Which banks offer Credit cards against FDs?
Only banks are currently licenced to sell credit cards against FDs in India. The Payments Council of India (PCI) has, however, recently proposed that the RBI also allow NBFCs to issue credit cards. You can use a credit card from ICICI Bank; SBI; Axis Bank; Kotak Bank; Yes Bank.
Who should avail a credit card with a fixed deposit?
This card is exceptionally appropriate, provided the characteristics of a credit card against FD, if:
- If it’s your first job
- If the income proof is absent.
- Nil or abysmal credit score
- You are retired, and you don’t have a regular income.
- If card issuers have refused you an unsecured credit card for other reasons.
- Homemakers
Are interest rates lower for secured cards?
Since a credit card is backed against a fixed deposit, issuers charge a comparatively lower interest rate than unsecured credit cards, because their risk is lower.
Eligibility requirements for a credit card against FD
Each lender has its terms of eligibility to a secured credit card; the common ones are these.
- Minimum 18 years old.
- The value and tenure of your FD should be equal to the minimum sum and term defined by the issuer.聽聽聽聽聽
Conclusion
You can switch to feature-rich credit cards when you start making a good salary. It serves as a multipurpose credit card, allowing up to specific days of interest-free ATM withdrawals, and avail an interest-free emergency loan.聽
Cardholders can also convert the transactions of such sums (varying from lender to lender) into simple EMIs. If you need a credit card against FD, apply through MyLoanCare to get the best available offers.
