A credit card allows you to afford goods and services through the convenience of cashless credit transactions separate from your savings or current bank account with a pre-set credit limit set by the issuer. The issuer (usually your bank) can gauge a reasonable credit limit by factors like your credit or CIBIL score, credit history, and income in a set period. There are many benefits of Credit Cards against Fixed Deposits.
Banks nowadays offer a Credit Card Against Fixed Deposit wherein you get a Secured Credit Card against your FD. Here your Fixed Deposit account is considered as collateral/security by the bank
Why to choose Credit Cards against Fixed Deposit?
You then have to pay back the credit issuer (Usually each month) the credit amount used in that period, along with a small interest fee; however, there is a period where transactions made with the credit card bear no charges. But this is the traditional form of a credit card and requires you to meet specific criteria that are out of the scope of many individuals, such as proof of income and ITR files, which is where Secured Credit Cards come into play.
What is a Secured Credit Card?
Credit Card against Fixed Deposit (AKA Secured Credit Card) is a service many banks in India now allow their customers to avail when they open a Fixed Deposit with the issuer bank. A credit card under this scheme enables individuals with limited financial access to avail a credit card based on fixed deposits. It is technically a pre-paid service where a portion of your fixed deposit amount is your credit limit, usually between 75 and 85% of the total amount.
What are the Benefits of a Credit Card?
- It is the most accepted mode of payment.
- You gain reward points, discounts, cashback and more as rewards.
- As long as you are under your credit limit, your transactions will not fail.
- It is incredibly secure as banks have a lot of resources dedicated to the safety of
- You can avail EMIs (Easy Monthly Installments) and Zero Interest EMIs while shopping online.
- You can improve your Credit and CIBIL score when you practice good Credit Card holder habits like timely dues payment, consistent spending patterns, moderate limit usage, etc.
- It is much easier to deal with card scammers as your card issuer closely monitors spending patterns and notifies suspicious activities immediately.
Who is the target customer for a Secured Credit Card?
A Secured Credit Card is for individuals with low credit scores or no credit history, who do not meet the income criteria, people who have just started earning, those who live in an area that the lender has blacklisted and people who are employed by organizations that are blacklisted by the lender or have a poor reputation.
What are the benefits of a Secured Credit Card?
- All the benefits of regular credit cards are here with some additional perks.
- Secured Credits are very affordable, and you can get one for as low as 10,000 FD.
- The credit limit on a secured credit card depends on the fixed deposit Typically, 75% to 85% of the deposit amount is the total credit limit on the card.
- Unlike standard Credit Cards, you do not need many documents to apply for a Secured Credit Card.
- Just like standard Credit Cards, banks offer 48 to 55 days on Secured Credit Cards which bears no interest, which is slightly higher than regular credit cards.
- These cards offer multiple perks like reward points, cashback, etc., to the customers.
- Interest on fixed deposit – Cardholders will continue earning interest on their fixed
- Your Credit Limit increases as your FD amount increases.
- You can now build a credit history and increase your credit score.
How to Apply for a Credit Card Against Fixed Deposit
Non-FD account holders must open a fixed deposit account with the respective bank. You may visit the nearest bank branch to open your FD account first followed by the credit card account. Once you open your fixed deposit account with the bank, you can apply for the credit card at the same branch by filling up an application for the same or doing it online if your bank features such a facility.
You can also apply for the secured credit card online, once your FD account becomes active with the bank. For FD account holders: If you already have a fixed deposit account with the bank from which you would like to avail of the secured credit card, you can simply apply online by visiting the bank’s website.
Documents Required to Apply for a Secured Credit Cards
- You don’t need to submit any additional documental evidence of your identity or place of residence. The bank will consider the proof that you provide while opening the FD account.
- However, they might check the validity of the same.
- When opening a new FD account with the bank, you may be asked to submit your identity and residence proof.
Things to remember before getting a Secured Credit Card
- The minimum tenure of the fixed deposit to get this service is 6 months.
- Your FD amount is locked in for the duration of the FD.
- Your deposit will be affected if you fail to pay dues in time along with your credit
- SSC can not be used to deposit money.
- Foreigners can not avail of this service.
- The FD serves as the security deposit for the credit In case of failure on the credit card payment, the credit card issuer reserves all the rights to withdraw your deposit. However, before such action, you will be informed by all communication lines.
An SSC is a great way to get your credit score and history started, especially if you have limited financial capacity. These scores enable you to get approved for loans easier and faster. It also builds good spending habits and teaches responsible account handling. So that’s all for Credit Cards against Fixed Deposit. Read our more blogs here
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