October 25, 2025 · 11 mins read
Santosh Kumar
While both types have the same function or purpose - extend credit to treat as an expense, they have strong differences in terms of how they are issued, how they work, and what they mean in your instrument to your overall financial plans. Before you know which credit product will work, it is important for you to understand those differences.
Regular credit cards - also referred to as unsecured credit cards - are issued by banks or financial organisations as non-collateralised loans. When you apply for a regular credit card, the bank or financial institution determines your suitability to manage a regular credit card based on your employment, income, payment history, and credit score.
If you fit their requirements, the bank issues you a credit limit, an amount that you can charge. The card can be used for purchases, online payments, bill payments, and cash advances (with a limit). Each month, you receive a statement showing your purchases and the minimum payment due. If you pay the entire outstanding balance in the statement period, you will not owe anything in interest. If you only pay the minimum, you will incur interest on the remaining balance.
An FD Credit Card (Fixed Deposit Credit Card) operates on a somewhat different principle. An FD Credit Card is a secured credit card, i.e., it is issued against a Fixed Deposit (FD) held by the bank and in the banking institution.
In this case, the FD would serve as collateral. The bank would place a lien on your deposit, meaning you would not be able to withdraw those funds while the card is active, and then would typically issue you a credit card with a credit limit of 75% to 90% of your total amount held in your FD.
Just like any other before it, the fixed deposit remains untouched while earning interest. You are able to use the card just like any typical credit card - for groceries, for online spending, or for paying monthly bills. The only difference is that the bank's risk is incredibly low because they already have your deposit as collateral.
The major difference between the two cards is in their collateral and qualification. A standard credit card is considered unsecured because the bank trusts that you will repay the obligation based on the projection of your financial trajectory and profile to the degree that it will approve the application for the credit line. On the other hand, an FD credit card is considered secured because it is backed by a fixed deposit instead of your score.
Because of this, it is much easier to be approved for an FD credit card. You might have low income, or you might only have little proof of employment or even weak credit, but as long as you are willing to open a fixed deposit, you can most likely open the FD credit card.
A standard credit card, on the other hand, will require you to be in good standing with your credit. If your credit is weak or if you have never taken out a loan or had a credit card before, your application may be rejected.
A standard credit card challenges your trust in your ability to repay, whereas an FD credit card uses secured collateral to establish trust that the bank can offer.
Also Read: can i withdraw money from FD credit cards?
Regular credit cards are generally intended for individuals with a well-established credit file. They are for people who use credit regularly and can show a steady income and payment history. They are lower-risk customers for the bank and, therefore, have a variety of credit card options with great features, such as travel perks and cash back programs.
FD credit cards, however, are intended for a different purpose. Primarily, they are for first-time credit users, students, homemakers, or people who have been previously declined for credit card offers based on a low score. It provides people with an option to build or rebuild credit without documents or a high CIBIL score.
Both types allow users to purchase items, pay bills, earn rewards, and have access to EMI options. However, in terms of flexibility, regular credit cards have an advantage.
Regular credit cards come with a limit automatically based on your financial history, and as you prove your ability to pay back, that limit can be increased. Some regular credit cards will also let you upgrade to premium cards, which can have a higher benefit for insurance, or just benefits generally when travelling internationally.
A good point of comparison between the two types of credit cards is the limits. As an example, an FD credit card has a limit tied to the fixed deposit – if you would like a larger limit, you will need to increase the amount in your FD.
And, while your FD remains locked, you cannot withdraw or close it unless you repay the card dues and subsequently close the card. So, while FD credit cards provide some security and ease of access, they have little flexibility.
Also Read: What credit card has no annual fee for students?
When it comes to outstanding dues or cash withdrawals, interest rates are fairly similar across the two types of credit cards. However, some banks provide a slightly reduced interest rate or annual fees on FD cards since they take collateral.
While both carry similar costs, the larger difference is in risk. With an unsecured card, the bank is the one taking on the risk that you might not pay what you owe. As such, penalties for late or missed payment can be high.
With an FD credit card, the bank can just sell your fixed deposit to recover all dues if you don't pay. This reduces their risk and increases yours, as you potentially lose the fixed deposit if you do not pay.
The credit limit on a regular credit card is determined by your income, repayment history, and overall financial profile. After some time, banks may allow you to increase your credit card limit if you behave satisfactorily when using it. On an FD credit card, your limit is directly based on your bank deposit. Essentially, banks allow you to use around 75%-90% of your fixed deposit amount as a credit card limit. So, for instance, if you have a fixed deposit of ₹50,000, your usable credit card limit may be between ₹37,500 and ₹45,000.
This implies that in an FD card, your increase in spending limit is directly dependent on your fixed deposit amount and your deposit; this is unlike a regular credit card, which will not automatically increase in spending limit by using the card.
Also Read: Is a FD credit card good?
For many people using this type of card, the biggest benefit is the ability to build or provide a basis to improve the user's credit history.
Your usage and repayments are reported to the credit score bureaus every month, which will improve your credit score slightly. Making timely repayments, using as little of your limit as you can, and consistently making payments over time will yield improvements in your credit score. When your score reaches a certain healthy level, you will qualify for an unsecured credit card with a higher limit and perks.
Conversely, conventional credit cards are generally designated for those who already have a credit history. Continued responsible use allows consumers to preserve and boost their credit ratings, but they are not geared towards consumers who are opening the account without any previous credit usage.
There are a variety of benefits offered by an FD credit card that make them appealing for a new finance user:
1: Quick approval: Almost anyone can obtain one, regardless of their credit score or income.
2: Credit building: As they begin to use it, they can establish or fix their credit profile.
3: Low rejection rates: Because the FD acts as collateral, the approval rate is high.
4: Continued interest on FD: Your deposit will continue to grow in interest while it is pledged.
5: Low fees: Some banks will charge a lower annual/ joining fee for an FD-backed credit card.
6: Easy documentation: They are simple to acquire and require little paperwork.
Also Read: Is a credit card against FD good for credit score?
Conventional credit cards are perfect for someone looking for the flexibility, higher credit limits, and additional benefits. They typically offer reward programs, travel benefits, fuel benefits, and cash back benefits that may not be granted with the FD credit card. After just a little while of responsible usage, you may be offered a higher credit limit and the ability to obtain premium or elite credit cards.
When using a regular credit card, your main risk is overspending and falling into debt. There is no asset securing the credit, which means if you don’t pay in full by the due date, the bank could charge you a high interest rate on any unpaid balance, and if you continue to make late payments, this could harm your credit score.
Whereas, with an FD credit, your risk is losing the fixed deposit. The bank could repossess funds you put into a five or ten-year fixed deposit if you do not pay the funds owed. Additionally, you might miss the interest you could have received from the deposit. Another major consideration with an FD credit card is the limited liquidity. You are not able to take your funds out of the deposit before maturity or use them for spending, while it is collateral for the credit card.
Also Read: benefits of fd credit card
If you are a first-time credit user, a student, or if you have a low score or flexible income, an FD credit card can be a great first card. With this credit card, you can responsibly build credit without worrying about being denied credit for an unsecured card down the road.
In contrast, if you have a strong financial position, good credit score, and stable income, you would benefit more from a regular credit card. This is a better option that offers better perks and terms, higher limits, and flexibility.
Both FD credit cards and conventional credit cards are helpful financial instruments, but they are distinct. An FD credit card is best suited for those new to using credit — people looking to either build creditworthiness or recover from a challenging credit history.
Yes, it is totally safe! Your cash stays with the bank, earning interest as collateral only. If you pay it off, there is nothing to worry about.
Yes, fixed deposit credit cards are designed specifically for those with little or no credit history. Your approval will depend on the fixed deposit you make and not your credit score.
Yes, it stays fixed; it will continue to earn interest at the normal rate of the fixed deposit, and you would only lose your earnings if you default on your terms as agreed.
No. You cannot pull or withdraw from the fixed deposit until you either pay off or close the credit card account.
Both cards can help improve your credit score if used appropriately. However, fixed deposit credit cards usually help beginners as these cards help establish credit history more easily than most, as you are building your credit on a fixed deposit that you implement.
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