October 13, 2025 · 10 mins read
Santosh Kumar
It’s hard to get a credit card as a newbie/low credit risk. Banks are usually reluctant to approve ordinary credit cards without a history of repayment. That’s where a credit card against FD comes in, a fool-proof, newbie-friendly way to jump-start your credit life.
You are allowed to use your FD amount to determine your credit limit to enjoy all the features of a standard credit card, while reducing the bank's risk. But the issue is, does a credit card against an FD really help your credit score? In this article, we break it down for you, explaining how it works, how it affects your credit score, and the intelligent ways to use it in your favour.
A credit card against a Fixed Deposit (FD) is a secured credit card issued using your FD as collateral. Instead of relying on income or credit history, the bank uses your deposit as security; this way, it is readily available for people with zero or low credit scores.
Banks generally give a credit limit of 75 to 90% of your FD value. For instance, with an FD of ₹50,000, the limit will be ₹37,500 to ₹45,000. During this time, the FD earns interest, which keeps your money active.
Large banks like SBI, Axis Bank, ICICI Bank, and Kotak Mahindra Bank provide such cards on the basis of minimal paperwork, which makes it an easy, low-risk foot in the door to begin constructing your credit profile.
A credit card against an FD works just like a regular credit card; the only difference is that it is secured by your fixed deposit. This is the way it typically happens:
Open a Fixed Deposit: You open an FD account with a minimum eligible amount, which can vary by bank (for example, ₹10,000 to ₹25,000).
Apply for a Credit Card: Once your fixed deposit (FD) is active, you can request a secured credit card linked to that FD. The bank uses your FD as collateral to secure the repayments and back the card.
Set Your Credit Limit: It's better to keep your credit limit at around 75-90% of your FD balance.
Use & Repay: Apply the card to your shopping, bill payments, or online expenses and repay once a month, just as with a normal card.
Using a credit card against an FD is actually a great way to build or improve your credit score. This is the way it benefits you:
Creates a Credit History: A credit record, if you’re a newbie, is formed as every purchase and payment is communicated to credit agencies such as CIBIL and Experian.
Reviewing Payment History: The most important factor in the formation of your credit score is the activity shown in your payment history, which can be smoothed by regularly and responsibly making timely payments.
Keep credit utilisation low: It is very liberating to have a credit card. Nevertheless, it is better to maintain credit utilisation under 30%. Here is an easy example for you: If your limit is ₹10,000, for example, try to keep it below ₹3,000. This shows that you know responsible credit management, and it will positively impact your credit score.
Enhances credit portfolio: It creates a type of steady credit on your report, showing creditors that you can handle different types of credit responsibly.
Reduce default risk: Since the card is secured by your FD, the risk of non-payment rapidly reduces. This structure allows you to build your credit profile in a controlled and fixed manner.
Also Read: When to Convert Credit Card Payments into EMI?
The credit card against FD has so many benefits, particularly for new users or credit rebuilders. Let's go through why it is a great option:
Easy Approval: Since the card is backed by your fixed deposit, banks face minimal risk, so approval is fast and convenient, with or without a credit history.
Helps Build or Rebuild Credit: Regular use and on-time bill payments are submitted to credit bureaus, helping you slowly but surely improve your credit score.
Accrues Interest on FD: Your FD continues to accumulate interest, meaning your money is working for you all the while you receive the benefits of a credit card.
Improves Financial Discipline: The relatively small credit limit (generally 75 to 90% of your FD) helps keep you from spending excessively; not only that, it builds positive credit habits.
Standard Credit Card Features: FD secured presents a bunch of features that are really the same as those of the standard cards, like cashback, reward points, and, in most situations, EMI conversion options.
Opportunity to Move-up: In most cases, a non-secured credit card can be applied for after a period of six to twelve months during which you have made your payments on time. These usually assist you in advancing in the credit score system as they provide better rewards and higher limits.
Also Read: Should You Use a Credit Card for High-Value Purchases?
Blocked FD: As long as the card is active, your fixed deposit will be blocked. You can not redeem or break it unless you cancel the card, which makes it a little inflexible.
Payment Delinquencies: The bank will take your defaulted dues from your FD, and a loss of a portion of the FD will be a loss to your account and your credit score.
Limited Credit Limit: Your spending capacity is dependent on your FD amount, generally up to 75 to 90% of it. If you are looking for higher limits, this can damage your flexibility.
Extra Charges: In the case of smaller deposits, the bank's annual or renewal fees could contribute to the reduction of the overall value.
No Immediate Credit Increase: A credit score is upgradable through patient and disciplined use; hence, it is important to be punctual with payments and careful not to exceed the budget; a single error can pull you back.
Also Read: Best Spending Categories to Earn Maximum Rewards
Having a credit card against FD is not the end of the story; it depends on how you use it, whether your credit score improves or not. Here are some intelligent strategies to make the most of it:
Always pay in full the amount you owe by the due date, not the minimum, because paying the minimum pays you back for longer while also charging you interest, negatively impacting your score.
Always go for using less than 30% of your available limit. For example, if your credit limit is ₹20,000, keep your monthly spending under ₹6,000. It gives a message of responsible behaviour to credit agencies.
Use your card for small, recurring expenses like mobile bills or groceries. This keeps your account active and builds a consistent payment history.
They charge you very high fees and very high interest rates. Besides, you aren't getting much value out of them in your credit history, so you would want to avoid them.
Establish reminders or use auto-pay to ensure that you don’t miss any due dates. Also, keep in mind that even one late payment can impact your credit report, so staying on top of your payments is essential.
Maintaining an active credit account over time works in your favour. Lenders value a longer credit history. Don't close the charge card or break the FD too early.
Also Read: Difference Between Annual Fee and Joining Fee
Although both cards operate similarly, they also show significant distinctions in risk, eligibility, and rewards. Here is a brief comparison:
Feature: Type
Credit Card Against FD: Secured (backed by FD)
Regular Credit Card: Unsecured (based on creditworthiness)
Feature: Eligibility
Credit Card Against FD: Easy approval, even with no credit history
Regular Credit Card: Requires income proof and a good credit score
Feature: Credit Limit
Credit Card Against FD: 75–90% of the FD value
Regular Credit Card: Based on income and repayment capacity
Feature: Risk to Bank
Credit Card Against FD: Low (FD acts as security)
Regular Credit Card: Higher (no collateral)
Feature: Interest Rate
Credit Card Against FD: Usually lower than regular cards
Regular Credit Card: Can be higher if payments are delayed
Feature: Ideal For
Credit Card Against FD: Beginners or low-score users
Regular Credit Card: Experienced users with strong credit profiles
Feature: Upgrade Option
Credit Card Against FD: Can be converted to unsecured after consistent use
Regular Credit Card: Already unsecured
One of the major advantages of using an FD-backed credit card is that it can be a very effective instrument for repairing and building a better credit history. It provides you with the three flavours of security, flexibility, and a simple way to boost your credit score, provided that you use it carefully and sensibly.
Make timely payments, keep your spending within the approved limit, and view the card as an opportunity to demonstrate financial discipline. This approach can set the foundation for a strong credit record going forward. It is important to note that their annual income is on a need-to-know basis and that proper judgment should be exercised regarding their credit.
Also Read: Foreign Transaction Fees on Indian Credit Cards
A secured credit card backed by an FD is relatively easy to obtain, especially for beginner users or those with a poor credit score.
A secured credit card is designed for beginner credit users or anyone who is seeking to rebuild a credit history safely.
Most banks require a Fixed Deposit (FD) to be created in the range of ₹10,000 to ₹25,000 before they will issue a secured credit card.
Typically, the credit limit will be roughly 75-90% of the FD amount set up; however, this does depend on each bank's policy.
Yes. If you use the credit card consistently and make timely payments, it will be reported to credit bureaus and help improve your score.
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