Getting a credit card can be challenging, especially if you have a limited credit history or a low credit score. However, there’s a solution that many banks in India offer – securing a credit card against your fixed deposit (FD). This option, known as a secured credit card, allows you to leverage your FD to obtain a credit card, even if you don’t meet the traditional eligibility criteria. In this guide, we’ll walk you through the process of getting a credit card on a fixed deposit and help you understand the benefits and considerations involved.
Understanding Secured Credit Cards
A secured credit card is a type of credit card that is backed by a fixed deposit. In other words, your FD acts as collateral for the credit limit extended by the bank. This arrangement reduces the risk for the issuer, making it easier for them to approve your credit card application, even if you have a limited or no credit history.
Here’s how a secured credit card works:
- You open a fixed deposit with the bank offering the secured credit card.
- The bank grants you a credit limit based on a percentage of your FD amount, typically ranging from 80% to 90%.
- You can use the credit card for purchases and transactions, just like a regular credit card.
- Your FD continues to earn interest during the tenure of the credit card.
Benefits of Secured Credit Cards
Secured credit cards offer several advantages, especially for those who are new to credit or have a low credit score:
- Easy approval: Since your FD serves as collateral, banks are more likely to approve your credit card application.
- No income proof required: Secured credit cards are ideal for students, homemakers, or freelancers who may not have a steady income or income proof.
- Builds credit history: Regular use and timely repayments of your secured credit card can help you build a positive credit history over time.
- Earn interest on your FD: While your FD is pledged as collateral, it continues to earn interest, allowing you to grow your savings.
Eligibility Criteria for Secured Credit Cards
To apply for a credit card against FD, you typically need to meet the following criteria:
- Be an Indian citizen residing in the country
- Be between 18 and 65 (may vary depending on the bank)
- Have an existing fixed deposit account or be willing to open one with the bank offering the secured credit card
- Maintain a minimum FD amount, which varies from bank to bank (usually starting from ₹10,000 to ₹25,000)
How to Apply for a Secured Credit Card
The process of applying for a credit card against FD is relatively simple. Here’s a step-by-step guide:
- Choose a bank: Select a bank that offers secured credit cards and has a fixed deposit product that suits your needs. Consider factors like interest rates, minimum FD amount, and credit card features.
- Open a fixed deposit: If you don’t already have an FD with the chosen bank, open one. Make sure to deposit an amount that meets the minimum requirement for the secured credit card.
- Apply for the secured credit card: Visit the bank’s website or nearest branch to apply for the secured credit card. Fill out the application form, providing your personal and FD details.
- Pledge your FD: As part of the application process, you’ll need to pledge your FD as collateral for the credit card. This involves signing an agreement that authorises the bank to liquidate your FD in case of default on credit card payments.
- Wait for approval: The bank will review your application and, upon approval, issue your secured credit card. This process usually takes a few days to a couple of weeks.
Tips for Using Your Secured Credit Card
Once you have your secured credit card, it’s essential to use it responsibly to build a good credit history. Here are some tips to keep in mind:
- Use your card regularly: Make small purchases and transactions every month to establish a pattern of responsible credit usage.
- Pay your bills on time: Always pay your credit card bills before the due date to avoid late payment fees and negative impacts on your credit score.
- Keep your credit utilisation low: Try to keep your credit card balance below 30% of your credit limit. High credit utilisation can harm your credit score.
- Monitor your credit score: Regularly check your credit score to track your progress and identify any potential issues early on.
Getting a credit card against a fixed deposit is a smart way to build your credit history and enjoy the benefits of a credit card, even if you have a limited credit background. By understanding the process, eligibility criteria, and best practices for using a secured credit card, you can make informed decisions and take control of your financial future.
If you’re considering getting a secured credit card, check out the Airtel Finance credit card options. With competitive interest rates and an easy application process through the Airtel Thanks app, Airtel Finance can help you get started on your credit journey. Take the first step today and explore the possibilities of a secured credit card backed by your fixed deposit.
FAQs
- Can I withdraw my fixed deposit while it’s being used as collateral for a secured credit card?
No, you cannot withdraw your fixed deposit while it’s pledged as collateral for a secured credit card. Your FD will be locked in until you close the credit card account or the bank releases the lien on your deposit.
- How long does it take to get a secured credit card after applying?
The processing time for a secured credit card application varies from bank to bank. Generally, it takes anywhere from a few days to a couple of weeks to receive your credit card after submitting your application.
- What happens if I default on my secured credit card payments?
If you fail to make your credit card payments, the bank has the right to liquidate your fixed deposit to recover the outstanding amount. This can also negatively impact your credit score and make it harder for you to obtain credit in the future.
- Can I upgrade my secured credit card to an unsecured one in the future?
Yes, many banks allow you to upgrade your secured credit card to an unsecured one after a certain period of responsible usage, typically 12 to 18 months. The upgrade process and eligibility criteria vary depending on the bank.
- Is there a minimum age requirement for getting a secured credit card against FD?
Yes, most banks require applicants to be at least 18 years old to apply for a secured credit card. Some banks may have a higher minimum age requirement, such as 21 years old.
