October 2, 2024 · 17 mins read
Santosh Kumar
Credit cards are one of the most widely used forms of payment in banking and finance. A credit card is a form of payment card, and the basic idea of a credit card is to make payments for the purchase of goods or services or withdraw cash but on credit, hence the term "credit" in its phraseology. A credit card, unlike a debit card, allows users to form a balance of debt, which then has to be paid at a later time, mostly in monthly cycles of instalments. When a credit card holder obtains a credit card, they are allowed to have a certain amount of credit limit set by the issuing bank. The concept is to "borrow" money from the credit limit you are allowed for various expenses. This "borrowed' money is then paid off via a monthly billing system.
Characteristic features of a Credit card and its benefits:
1. A credit card is an easy and hassle-free payment tool.
2. It has ease of access and, depending on the issuing authority, can be used in multiple countries.
3. It comes with additional perks like discounts, promotional deals, lounge access, pre-approved loans, etc.
4. It is not a form of investment but a form of payment and cash withdrawal.
5. Credit Cards are a great way to build credit history and establish your credit portfolio.
6. Credit cards can be a real blessing in emergencies when you need immediate access to funds. They are a great option for borrowing for a limited time or for making necessary purchases with limited funds.
7. A Credit card is a suitable mode of payment for people looking for a flexible system of managing their funds. It is perfect for young people starting out to build their credit profile. It is also great for businesses that want to track their business expenses and for individuals who wish to manage small-scale purchases without applying for a proper loan.
Credit card Fixed deposits are a type of financial investment that has been popular for a long time. The fundamental concept of a fixed deposit is that an individual can deposit a fixed amount of money for a specified period, hence the term "fixed" in its terminology. Over a period of time, the amount gathers interest, which has been set at the time of deposit, and then at the end of the term period, a maturity amount is ready to be withdrawn by the depositor. It is one of the most popular forms of investment, particularly for its reliability, low-risk factor, and assured returns.
Characteristic features of a fixed deposit and their benefits-
1. They are a very low-risk type of investment. They provide a safety net and are comparatively safer from banking frauds and scams.
2. Depending on the bank and the scheme, the lock-in period for a fixed credit cards deposit can vary from several weeks to months to years.
3. This mode of investment is very conventional and is perfect for individuals who wish to seek very stable and low-risk investment options.
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Is credit card against FD good? For a credit card issued against fixed deposits, the two concepts are brought together- that of a credit card and a fixed deposit. Normally, a credit card does not require a deposit because it works on the principle of debt and borrowing. However, sometimes, credit cards are issued are called CC against FD by pledging the fixed deposit as collateral. This hybrid method allows users the flexibility of having a credit card with the security of a fixed deposit. It is known as a secured credit card and minimizes the risk factors associated with an unsecured type of credit card. This is a very popular method of acquiring a credit card, and its benefits are obtained by many people who wish to explore the world of credit cards but have limited credit scores and borrowing reliability.
Now that you know what a credit card against FD accounts in India is, we’ll study how they work. Every bank specifies a minimum FD amount for your credit card application. When you apply for a credit card against a fixed deposit account, the total amount in your FD is directly proportional to your credit limit.
This implies, that with a bigger amount in your FD account, you can have a more substantial credit limit. Typically, banks in India offer almost 75% to 85% of the FD amount as your credit card limit. Additionally, you don’t have to submit any income proof while you are applying for your credit card against the FD. The fixed deposit account acts as the security deposit for your credit card. In case of any defaults in credit card repayments, the bank will restrict your rights to break the fixed deposit or impose other criteria.
On the other hand, using a secured credit card well by paying your dues on time and not utilizing the maximum credit limit might allow the bank to delink your FD.
1. Provides collateral: The main aim of FD based credit cards is for the amount to function as collateral. In this case, the credit limit is set depending on the deposit value and ranges from 80% to 90% of the entire amount and you don’t have to worry about cibil rating affect fixed deposit. credit score does not affect your credit limit unlike other forms of credit cards.
2. Rates of interest: The interest rates for credit cards on FD basis are generally a bit lower than those of other credit cards. This is because the fixed deposit amount provides a layer of security that reduces the risk for lenders.
3. Repayment: The cardholder can utilize their credit limit and is expected to make payments like regular cards. The only difference is that failure to pay and continuous defaulting will automatically result in the bank covering the outstanding amount from the fixed deposit.
4. Duration and renewal: The validity of the credit card is often time-lined with the duration of the fixed deposit. Similarly, upon the completion of the fixed deposit's term period, the holder may have to renew or re-evaluate their terms and credit card usage with the bank.
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1. Ensures a lower rate of interest: The fact that the card is secured by a fixed deposit means it is a low-risk factor, which in turn results in lower rates of interest compared to regular cards. This is a great option for individuals who wish to gradually increase their credit scores but have less creditworthiness to begin with a new FD credit card.
2. Easy Approval: This is a perfect option for people with lower credit scores who have difficulty rebuilding their credit profile. Individuals with such portfolios will have an easier time obtaining a credit card through a fixed deposit. This is a way of establishing trust and building a credit profile among lenders. FD credit card apply requires minimal to no documentation, and everything is regulated through your fixed deposit account which eliminates a lot of details involved in the approval process.
3. Flexibility in Financial Issues: This middle-ground method allows individuals some financial flexibility, such as immediate access to funds during emergencies or to make sudden purchases which they would otherwise not have any access to.
4. Interest on Fixed Deposit: irrespective of the cardholder's credit utilization, the account holder will continue to collect the interest rate on the fixed deposit as well. So, apart from being a mode of payment and instant fund access, it also serves as a form of investment. Ensures Safety and reliability for bank FD credit card lenders- Not just for borrowers, but this method helps lenders eliminate many risky borrower and provides them with a safety net to avoid losses.
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A secured credit card acquired through a fixed deposit has many advantages but also has certain limitations. Read below to be abreast of the limitations so that you can always make an informed choice -
1. It comes with a specified lock-in period, which may limit your chances that you come to know how cibil rating affect fixed deposit and liquidating your amount when required. Pre-term liquidating will result in penalties, fines and will have an impact on the overall maturity amount.
2. It also allows for a specific credit limit that has no relation to your creditworthiness but is calculated in accordance with your fixed deposit amount. This can mean either a higher credit limit or a lower credit limit that you will not have a say on.
3. The risk of losing your fixed deposit amount always looms large with this type of credit against credit card account because failure to repay or default will result in the lender seizing your fixed deposit amount.
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These are some of the banks in India that offer a credit card against a fixed deposit-
1: AXIS Bank
2: IDFC FIRST Bank
3: HDFC Bank
4: SBI
5: HDFC Bank
6: Kotak Mahindra bank
7: RBL Bank
8: IndusInd bank
9: Bank of Baroda
10: Union Bank of India
Here is a list of the top five credit cards that can be acquired against a fixed deposit-
SBM Credit Card - The SBM Bank (India) along with Paisabazaar being the co-branded partner has now been witnessed introducing credit cards against Fixed Deposit (FD) known as the Step Up Credit Card. This credit card against FD is designed to the requirements of an average salaried individual. The minimum FD amount is up to RS. 2,000 which makes it highly affordable too. The Step Up Credit Card is known to be 100% pre-approved which also takes minutes to apply.
IDFC FIRST Bank Credit Card- This is a secured best FD credit card which is given against a fixed deposit in IDFC FIRST Bank. It comes with minimal to no annual charges and has a reward based system on all kinds of transactions. It is generally issued against a 5000 fixed deposit to INR 25,000 and more. The credit limit on this credit card is typically set at 85% percent of the total fixed deposit amount.
ICICI Bank Instant Platinum Credit Card- Another good option is the ICICI Bank Instant platinum Credit card which can be availed against a fixed deposit of 20000 or more. It is very easy to use and has a minimal annual fee of 500. The credit usage limit is set at 85% of the fixed deposit amount which depends on the credit card holder.
Axis Bank Insta easy Credit Card- Another secured FD credit card that is perfect for individuals with a lower credit history and it can be availed on a collateral of a fixed deposit. It has a quick approval process and comes with cashbacks, discounts and rewards with selected merchants and brands. It can be applied online and has an instant approval procedure. The annual charge for this card is Rs. 500.
SBI Card Unsecured Credit Card – This is a secured card which is tailor made for users with low income or low credit score. This card is generally given against a fixed deposit in SBI with a minimum amount of 25,000 and more depending in the individual. The annual charge is 499 and it comes with basic perks like cashbacks, rewards and selected discounts.
HDFC EasyEMI Credit Card- This is also another secured credit card that allows individuals with low to no credit score of experience a credit card. It has a quick approval of FD credit card apply online process and offers some good rewards and discounts on transactions. It can be easily acquired through an online process. The annual fee is Rs. 500 and the credit limit is 75- 80% of the FD amount. This card also has a flexible repayment system making it easier to manage credit for users.
Here are some tips and tricks to ensure you get the maximum benefit from your card issued against a fixed deposit. Following these steps will ensure you have a well-managed credit card, which will translate into a steady credit score.
1. Always read the fine print and know your limits, interest rates, and any fees that may be associated with maintenance, transactions, withdrawals, etc. A well-informed consumer makes the best choices.
2. Do not overshoot your limit or overspend your card. Limit your purchases and expenses to the basic requirements, which will allow you to regulate your credit utilization ratio and help you maintain a good credit score in the long run. You should definitely not use this card for impulse purchases and unnecessary spending.
3. Always pay off the debt on time through a scheduled monthly cycle. Avoid being late or defaulting on your payments, as this can impact your deposit amount and credit score. Late payments can incur additional rates and late fees, so always make sure to pay on time. You can set reminders or enable automatic deductions to keep track of your payment cycle.
4. Make ample use of the rewards and benefits, whether for shopping, making payments, paying bills, etc. Keep track of your accumulated rewards and use them to your advantage before they expire.
5. Try to use the card to its full potential by grabbing all additional features like promotional deals and discounts, travel benefits, purchase protection, etc. Lenders and banks have many programs for their cardholders, so make sure to check that out and use it to your benefit.
6. Always track your fixed deposit account and stay informed if it is nearing its end or needs to be evaluated or reinvested.
7. You should periodically assess your credit requirements, check if the card is lifetime free FD credit card or still meets all your requirements, see if it needs to be reassessed, and negotiate with the bank if necessary.
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Rides Out Low or No Proof of Income
1: Are you a salaried professional with a low income?
2: Are you a person working on your first start-up?
3: Are you a homemaker?
4: Is proof of income not within access?
5: Do you have a low credit score?
It might be difficult to get a credit card if you answered yes to any of these questions.
A secure credit card requires no additional proof of income. It is also available for consumers with low credit scores and even homemakers who have no steady salary. The bank takes your fixed deposit as the security amount and provides you with a credit card. You spend your own money and pay it later to the bank.
Many of us often step back from credit cards in general due to the fear of sky-high interest rates. Most commercial credit cards have such high-interest rates that it is impossible to pay them back in time if you do not have a steady flow of cash.
If this is why you are hesitating to get a credit card, getting a secure credit card against your fixed deposit can be a great option for you.
Most of the secure credit cards available in the banking sector offer much lower interest rates to their customers than usual credit cards. Now you can spend your own money and pay it back without having to worry about how much extra you are going to have to pay as interest.
Having a secure credit card can enhance your credit score. It not only enables you to experience the advantages of owning a credit card but also works to improve your credit score. This is so that you can apply for credit cards with larger limits in the future. A high credit score also makes it easier for any consumer to apply for loans and possibly get them at negotiable interest rates.
We all know how much paperwork and tiresome verifications a credit card application takes. It is not only tiring to do all the necessary paperwork but also very difficult to find the time in a working day to complete all the necessary steps.
A secure credit card on fd entails minimal paperwork when compared to regular credit cards. Now you can get all the benefits of a credit card without running from pillar to post to fetch the details and complete huge formalities to get a credit card.
To avail of a secure credit card against your fixed deposit, most banks have minimum tenure for the FD. In most cases, you need to have the fixed deposit in your account 6-8 months prior to applying for a secure credit card to avail of its benefits.
Secure credit cards offer various cashback and offer coupons for purchases you make with the credit card. Most banks also offer an interest-free period for your secure credit card when you get it. Usually, the interest-free period ranges from 48 to 55 days.
A credit card against a fixed deposit is a convenient and practical way for people who may have difficulty acquiring a credit card through normal means. A secured credit card obtained against a fixed deposit requires no proof of income, so it is a feasible option for many individuals who do not have a steady income or have a low credit score. Often, people withdraw from the idea of holding a credit card due to its association with high maintenance fees, additional charges, and a higher rate of interest on the credit. However, having a credit card against a FD saves you from all these. It provides you with the convenience of a credit card and the security of a Fixed deposit. It allows a certain financial independence and is especially beneficial for people with lower credit ratings and for individuals who are starting to build a credit profile from scratch with limited resources and no fixed source of income. It is a perfect start to having and managing a credit account and establishing your identity in the world of personal finance.
Which is better- a fixed deposit or basic credit card?
A fixed deposit and a credit card are fundamentally different—the former is a mode of investment, and the latter is a mode of making payments and purchases. Both can be used according to the individual's requirements.
Can a credit card be issued to a fixed deposit account?
A credit card generally doesn't require cash deposits, but in some cases, banks may use the fixed deposit amount to approve the credit limit for a secured credit card.
Can a person with a low credit score obtain a credit card with a fixed deposit?
Yes, people with low credit scores can obtain a credit card with a fixed deposit. This is, in fact, a great way for such individuals to build their credit profile.
Is credit card against FD good?
One benefit of using a credit card against a fixed deposit is that the credit limit is dictated by the total amount of your deposit, not by the bank.
Is the credit card still valid to use after the fixed deposit is mature?
No, the credit card's validity generally expires with the maturity of the fixed deposit when the account is closed.
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