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Why you Should Apply for Credit Card Against FD?

01 July 2022

A credit card against your own fixed deposits (FD) is a ‘secure’ credit card. An advantage of this is that a secure credit card can be availed against a low credit score and no income proof too. This makes them great tools for people who want to work on their credit score to improve their chances of higher loans (provided financial prudence with this one!) 

With a secure credit card, you can spend money from your fixed deposit and pay it later. The total credit limit of your secure credit is the fixed amount in your fixed deposit. However, most banks offer 75% to 85% of your fixed amount as the credit limit of your secure credit card. The higher your fixed deposit amount is, the higher your credit card limit will be.

Still not entirely convinced about a secure credit card? Here’s why you should get one.

Rides out low or No proof of income

  • Are you a salaried professional with a low income?
  • Are you a person working on your first start-up?
  • Are you a homemaker? 
  • Is proof of income not within access? 
  • 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.

Incurs much lower interest rates 

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. 

Improve credit score

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.  

Also, Read - 13 things you must know about Credit Cards

Pulls down the exhaustive paperwork

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 against your own fixed deposit 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.

Minimum tenure for FD

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.

Cashbacks and interest-free periods

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.

The takeaway

A secured credit card against your FD offers many advantages. Before opting for a secured credit card, it is important to remember that your fixed deposit is held as a security deposit of your credit card. If you fail to pay the bills of your secured credit card, the bank has all the right to pay the due bills from your fixed deposits.

However, it is still a very good option for customers with low credit history, homemakers and senior citizens, and also non-salaried professionals.

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