October 25, 2025 · 8 mins read
Santosh Kumar
Credit cards are a widely used financial tool worldwide, including in India. Credit cards enable a person to purchase or pay for a lot of daily and large expenses at once, without paying in cash at the moment. Credit cards also help to build a credit history, depending on the credit score. For beginners such as young adults, getting a credit card might seem far-fetched and scary. There are concerns about overspending, debt, regular payments on time, and more. But FD-backed credit cards can be a secure option for beginners. And can help them build a credit history. This article will talk about how FD-backed credit cards can be good for a beginner, with some potential disadvantages and precautions.
An FD-backed credit card is a special type of credit card, guaranteed by a fixed deposit (FD). The FD and the credit card come from the same bank. But the credit limit of an FD-backed credit card is determined by the amount of the FD, whereas in traditional credit cards, the credit limit is determined by income level, credit score, and many other financial factors, but typically not by an FD. For an FD-backed credit card, the credit limit varies but is not different for every billing cycle, like other credit cards.
For example, if a person has a fixed deposit of ₹ 20,000, the bank will give a credit card of about the same limit or a bit lower. This ₹ 20,000 FD acts like a guarantee or collateral and ensures that the bank can recover the money if it is not paid on time. This is good for the bank and reduces money recovery risk, but also helps a beginner to get a credit card without any income or credit history.
FD-backed credit cards function pretty similarly to other credit cards. The consumer buys items online, offline (in-store), and also pays bills and subscriptions with the FD-backed credit card, as with any other credit card. But there are some differences between an FD-backed credit card and other credit cards, like:
1: The credit limit is the primary difference between an FD-backed credit card and other credit cards. An FD-backed credit card’s limit is approximately 75-90% of the FD. Hence, the FD amount determines the credit limit. However, for other credit cards, the credit limit is determined by the income level of the consumer.
2: Other credit cards do not have an FD as collateral. But for an FD-backed credit card, it has an FD as collateral, and that FD accumulates interest throughout the period of the lien between the bank and the cardholder. The lien period is typically the duration a consumer is using the credit card.
3: Because the FD-backed credit card has an FD as collateral, if the consumer fails to pay, the unpaid amount can be taken out of the FD. This is highly different from other credit cards, where there is no FD, hence money cannot be taken out from there if payments are not made in time. But for both cases, for non-payment, there can be accumulated interest, potentially creating damage to the credit score.
Also Read: Difference Between Annual Fee and Joining Fee
Eligibility for an FD-backed credit card is simple and flexible, as listed below:
1: The applicant must be 18 years old.
2: There is no minimum income needed for a beginner, but an FD is needed to secure the credit line. Hence, having an FD is a must. The minimum amount in an FD needed depends on the bank.
3: No credit history is required for a beginner to get an FD-backed credit card. This makes this kind of credit card ideal for beginners.
4: Documents such as PAN card, Aadhar card, Voter card, Passport might be needed, if not all.
This kind of flexible eligibility criteria makes an FD-backed credit card ideal not only for beginners, but also for those who are looking to build a credit history.
Also Read: Foreign Transaction Fees on Indian Credit Cards
1: A FD-backed credit card is approved very easily as the FD is collateral. This makes it easy to get the credit card approved.
2: Often, credit card beginners don't have any credit history. An FD-backed credit card, if used wisely, can start building credit history and a developing credit score. A credit history these days is essential for any kind of loan approval. Hence, an FD-backed credit card will be good for beginners.
3: While the consumer keeps using the credit card, the FD keeps earning interest. Although the FD money cannot be withdrawn during the lien period, the money accumulates interest.
4: As the credit limit is tied to the FD amount, it puts a limit on spending and checks for overspending.
5: An FD-backed credit card is very secure and has less risk, and it is more screened by banks. Hence, it is more appropriate for beginners who do not have a clear idea about credit cards.
6: Even though an FD-backed credit card is not a premium-level credit card, it still offers some reward points, cash back, online pays, EMI payments, and more, which can help a beginner to learn financial planning.
7: FD-backed credit cards sometimes also have the option to upgrade into a regular/ premium credit card. This also provides a pathway for beginners to get a higher standard financial option.
Also Read: Best Spending Categories to Earn Maximum Rewards
Along with the advantages, there are some disadvantages as well with an FD-backed credit card. Such as:
1: The credit line is determined by the FD amount. So, if a beginner is trying to have a higher credit limit, this might not be a great option.
2: The money amount in the FD is locked till the lien period is over. The FD cannot be accessed within the lien time. Hence, this might be an issue for a beginner, especially one who may need the cash for an emergency.
3: The perks, rewards, and cash back in an FD-backed credit might be limited.
4: The FD-backed credit still will have late payment fees and interest. If the beginner is not used to doing financial budgeting, it could lead to potential debt for the person.
SBI Unnati Card: The minimum FD requirement is ₹25,000. There is an annual fee, but that is waived for the first few years. There are rewards and cash back on purchases, and later can be upgraded into a premium card.
ICICI Bank FD credit card: The credit limit is between ₹10,000 and ₹100,000. The FD amount should match. Cashback is offered on online purchases and, after a year or so, can be upgraded to a regular credit card.
HDFC Bank FD card: Minimum FD needed is ₹50,000. The credit limit is 90% of this amount. This card also offers rewards, cash back, and dining offers.
Axis Bank FD credit card: For this one also, the credit limit is between ₹10,000 and ₹100,000, and the FD should match within the limits. This card also offers rewards points and is instantly approved.
IDFC FD credit card: The FD needed is a minimum of ₹25,000, and the credit limit should match the FD. This card also offers cashback and shopping rewards.
Also Read: Should You Use a Credit Card for High-Value Purchases?
The minimum amount needed is ₹25,000- ₹50,000 overall. Although some banks might need a higher amount.
Not easily. The FD remains as a guarantee to the credit card, so the FD can be withdrawn only after the lien period is over and the credit card is closed.
Yes, the FD continues to earn interest throughout the lien period at the rate the FD was locked. Even though the FD money cannot be withdrawn.
Yes, if the bills are not paid on time and the card keeps accumulating interest, then the credit score can go down, and thus the credit history will be highly affected. Although this can be avoided by timely payments and keeping low credit usage.
Yes, after the lien period, it can be upgraded. Provided the consumer has demonstrated a timely bill payment.
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