Having a credit card in your wallet provides a financial safety net and the convenience of cashless transactions. It also plays a crucial role in building your strong credit history. If you don’t qualify for a regular credit card due to eligibility criteria, getting a credit card against Fixed Deposit (FD) investment can be an ideal alternative.
If you do not have a credit history or a low credit score, a credit card on FD can be a great financial tool for you. Issued against a fixed deposit, it minimises the risk for banks while granting cardholders access to credit and a chance to enhance their credit profile.
Understand Credit Card Against Fixed Deposit
This type of secured credit card offers you the advantages of a standard credit card while guaranteeing lower risk for the lender thanks to a fixed deposit with the issuing bank. Banks usually offer 75% to 85% of the deposit as the credit limit.
This way the credit limit on a secured credit card is directly tied to the FD amount. The bank may redeem the associated FD to recoup the unpaid balance in the event of late payments. Secured credit cards are a great choice for you as this card has a simple approval process.
Know How Secured Credit Cards Work
You can easily get a credit card by depositing a specific amount into a fixed deposit account. The deposit acts as collateral, reducing the issuer’s risk, especially for those with low or no credit history.
- Credit Card Against FD: When you open an FD with a bank and apply for a secured credit card, there is no requirement for additional income proof.
- FD acts as Security: If you default on payments, the bank or issuer can liquidate the FD to recover the dues.
- Bank Intimation Before Action: Before liquidating the FD, the bank will notify you through all available communication channels.
- Upgrading to an Unsecured Card: Maintaining a secured credit card in good standing for one to two years can prompt the bank to delink the FD and upgrade you to an unsecured card.
- Maintaining Good Standing: Good standing involves responsible usage, staying within spending limits, repaying dues on time every month, and showing consistent financial behaviour.
Benefits of Credit Cards Against Fixed Deposits
Here are some benefits of credit cards against FD, so you can make an informed decision:
- Easy Approval
FD-based credit cards are ideal for individuals with limited or no credit history, offering a straightforward approval process. Once you have an FD of the required amount, the approval is almost guaranteed. - Build Credit Score
FD-backed credit cards build a positive credit history and improve your credit score over time. Simply ensure you pay your full bill on time and do not use more than 30% of your credit limit. - Investment Continuity
Your fixed deposit remains intact as an investment and continues to earn interest, even when pledged as collateral for the credit card. This helps you boost your savings. - Lower Fees
FD-backed credit cards typically have lower joining and annual fees compared to regular credit cards, making them a cost-effective option.
Eligibility Criteria for Credit Card on FDs
Here are some general criteria you need to fulfil to qualify for these cards:
- Citizenship: Must be an Indian resident or NRI with a valid address
- Age: The age between 18 to 65 years (varies by issuer)
- Fixed Deposit: Must have or open an FD with the issuing bank
- Minimum FD Amount: Ranges from ₹10,000 to ₹25,000 (varies by bank)
How to Apply for a Credit Card Against FD: A Step-by-Step Guide
The following stages are included in the easy steps for applying a credit card against a fixed deposit:
1.Create a Fixed Deposit
- If you don’t already have an FD, open one with the bank. You can do this either online or by visiting the bank.
- Choose an FD amount that matches your desired credit limit, as the FD will act as collateral for the credit card.
2.Fill Out Your Credit Card Application
- Approach the bank to express interest in applying for a credit card against your FD.
- Complete the application form, providing personal details along with the information about your Fixed Deposit.
3.Submit the Required Documents
- Provide necessary KYC documents, such as identity and address proof, along with the Fixed Deposit certificate to complete the documentation process.
4.Approval and Issuance
- After submitting the documents, the bank will verify and assess your application.
- Once approved, the bank will issue the credit card and send it, along with relevant terms and conditions, to your registered address.
If you’re looking to build or improve your credit score, you can go with a credit card against a fixed deposit. With the FD-backed One Credit Card, you not only gain access to credit but also earn interest of up to 7.5% or more on your FD which makes it a unique and rewarding choice.
Unlike debit cards, which don’t contribute to building a credit history, the One Credit Card helps you create a strong credit profile. As your FD balance grows, so will your credit limit, offering a clear path to greater financial stability and higher credit scores over time.
You can get started with an FD as low as Rs.5,000 and choose from RBI-approved banking partners, SBM or Federal Bank. Apply online right now and enjoy perks like 5X reward points, offers across retailers and zero annual/joining fees!
