What is a Credit Card Against a Fixed Deposit and How Does it Work?

Planning to invite friends to a luxurious restaurant for your birthday treat? At such times, a credit card can be your saviour and you don’t have to burn down your wallet. You don’t even need a high CIBIL score or sufficient credit history to get a credit card. Yes, that’s right! What you need is a credit card against an FD (fixed deposit). Here is all you need to know about it.

What is a credit card against an FD?

You can get a credit card against a fixed deposit from the card issuer or bank. While some credit cards may require you to have a good credit score or history and a stable monthly income, you can get a credit card against FD by simply having a fixed deposit of a certain amount with your bank. The minimum FD amount and tenure are low, which makes it easier for you to be eligible. The limit that you can spend on the card may vary from one bank to another. For instance, Kotak811 offers a secured credit card with an FD of only ₹5,000 with a tenure of just 6 months.

How does a credit card against FD work?

Since this credit card is linked to a fixed deposit, the credit limit is directly proportional to the amount you have in the associated FD. The higher the amount in your fixed deposit, the higher is the card's credit limit. The percentage of the FD amount that becomes your credit card limit depends on the bank. 

How are the credit card payments secured without your credit history? The FD against which you avail this card acts as a security deposit or collateral. If you default on your credit card payments, your card issuer or bank can recover the amount by breaking your deposit. Of course, you will receive alerts before this happens.

You can keep your card in good standing simply by:

1. Keeping the card active by using it regularly
2. Paying off monthly dues on time
3. Using the card within the spending limit
4. Maintaining a consistent spending pattern

Documentation

There is no need to submit any income proofs, credit history, or CIBIL score. A secured credit card involves minimum documentation. All you need is an FD certificate.

Benefits of having a secured credit card

Here are the numerous benefits that you can enjoy with a credit card against FD:

Minimum paperwork: You need to provide your fixed deposit papers and some other basic documents to get a secured credit card. 

No credit history needed: You can get this credit card without having any credit history or a CIBIL score.

Borrower-friendly FD amount and tenure: You can apply for this credit card on a fixed deposit starting from just ₹5,000 with a tenure as low as 6 months. This makes it easy for you to get a credit card.

High credit limit: You can access as much as 85% to 90% of your fixed deposit amount as the credit limit on your card. 

Interest-free period: Getting slightly delayed in paying back? No worries. You get a grace period, during which no interest is charged. This may range from 48 to 55 days. During this period, you can use your card for purchases but don’t have to pay interest on the used credit!

Interest on fixed deposit: Even while using your FD amount as collateral, you keep earning interest on your fixed deposit. So, on the one hand, you can continue spending and earn extra money through interest on your FD!

Rewards: You can earn rewards like cashback and reward points on purchases made using the card.

Improve CIBIL score: A credit card against an FD can help improve your CIBIL score and make you eligible for other credit products, like personal loans. For that, you just need to make timely payments when the repayment becomes due.

When is a credit card against FD more suitable?

A credit card against an FD is ideal if you:

Wish to get a credit card without a high credit score or little to no credit history.

Want to improve your credit score to become eligible for loans.

Don’t meet the income criteria of other credit cards.

Have just begun earning.

Live in a place that is blacklisted by lenders.

Apply online for a credit card against your fixed deposit today to earn extra money and rewards and make all your dream purchases, while improving your credit score!