A credit card comes in handy when you need immediate cash for an emergency. Getting a credit card becomes easier when you have a good income, good credit score or work for a reputed employer. Every bank provides different credit cards for a wide range of customers based on their eligibility criteria. When you are unable to get a credit card due to a poor credit score or low income, a secured credit card can be the best option to go for as you can easily become eligible for approval.
Fixed Deposit (FD) is a popular saving instrument that lets you park a huge amount of money with the bank and earn a decent interest until the date of maturity. You can now use your fixed deposit to get a credit card, which brings you a host of benefits.
Credit Limit on a Credit Card Against Fixed Deposit
The credit limit on an unsecured credit card is determined by the applicant’s annual income. But in a credit card against a fixed deposit, your credit limit will be allocated based on the amount parked in deposit account. The credit card issuer generally provides 80% to 85% of the fixed deposit amount as the credit limit per month. Moreover, you should have a minimum amount of Rs. 15,000 to Rs. 20,000 to get this credit card.
Advantages of a Credit Card Against Fixed Deposit
Normally, when you apply for a credit card, the card issuer may ask you to submit a lot of documents as proof for your credit eligibility. But when you apply for a credit card against the fixed deposit, the process is fairly simple as the lender has the advantage of your security. Following are some of the advantages of a credit card against your fixed deposit.
As it is a secured credit card, you do not have to submit a lot of documents to get the card approved. The lender may not ask you to submit income documents due the advantage of collateral.
Poor credit score can hamper your chances of getting a normal credit card. But a credit card against a fixed deposit is easily approved for such individuals. If you have a low score, you can get this credit card and improve your credit score in the process with regular repayment of credit card dues.
Getting a higher credit limit on an unsecured credit card is possible only when you have higher income. But for this card, even if your monthly income is low, you can still get a credit card with a higher credit limit with the help of a fixed deposit.
Credit card applications from areas which are blacklisted by the lenders do not get approved easily. But a credit card against a fixed deposit can get easy approval despite such drawbacks.
Interest free period on a secured credit card is normally higher than other credit cards. It ranges between 48 to 55 days.
Getting an add-on card is easier with a secured credit card if all the dues are paid on time.
Disadvantages of a Credit Card Against Fixed Deposit
Though a credit card against fixed deposits is approved easily, it too has its own disadvantages.
In case you fail to repay the credit card dues continuously, the card issuer has the right to take over your fixed deposit to cover amount used on your card.
Not repaying your monthly payment certainly damages your credit score which makes difficult for your future borrowing.
In addition to pledging your fixed deposit, you will have to pay an application fee and processing fee to get the credit card. This can increase the cost of owning the card.
How to Apply for a Credit Card Against Fixed Deposit?
To avail this credit card, one must have a fixed deposit which should have a minimum amount ranging between Rs. 15,000 to Rs. 25,000. You can either apply online or by visiting the branch of the credit card issuer. If you are applying online, you can either apply directly on the lender’s website or through third-party financial websites who have tie-ups with the lenders. You would be allocated up to 85% of the fixed deposit principal amount as credit limit on your secured credit card.
Credit Card Against Fixed Deposit from Popular Banks
Following are some of the secured credit cards provided by popular banks in India against your fixed deposit.
ICICI Bank Coral Credit Card Against Fixed Deposit
To apply for this credit card, you should have a minimum amount of Rs. 20,000 in your fixed deposit, and the minimum tenure of the fixed deposit should be 180 days. The annual fee on the credit card is Rs. 500 which can be reversed on the annual spends of Rs. 1,25,000. Other benefits include movie tickets, PAYBACK points and discounts at dining.
SBI Advantage Plus Card
This credit card can be availed against 85% of the fixed deposit. The annual fee on the card is Rs. 500. The benefits on this credit card include 100% cash withdrawal limit, worldwide acceptance, add-on cards, etc.
Axis Bank Insta Easy Credit Card
This credit card can be availed against 80% of your fixed deposit amount. This is a lifetime free credit card that allows you 100% cash withdrawal from any ATM. 1% fuel surcharge waiver, EMI facility, 50 days of interest free period, discounts on dining etc., are some of the benefits of using Axis Bank Insta Easy Credit Card.
Kotak Mahindra Bank – Aqua Gold Credit Card
With an interest free period of 48 days, this credit card can be availed against 80% of your fixed deposit principal value. Movie tickets and add-on cards are some of the advantages of this credit card. Your term deposit should have a minimum of Rs. 25,000 to get this card. This is a lifetime free credit card which can be obtained by all Indian residents.
Credit card against fixed deposit works best for individuals who have a damaged credit score, low income or people who are unable to get approved for a normal credit card. It is a great way to build your credit score with the regular repayment on the monthly bills.