While factors like unstable income and low credit history can make it difficult to get a regular credit card, a credit card on FD comes as an excellent solution. It provides you with the functionality of a regular credit card. You can get this card against a fixed deposit account with many financial institutions.
This type of card comes with some of the perks of traditional credit cards. Getting this card is a wise option if you don’t have a credit history or have a low credit score. You can make the most use of it by understanding how it works and more.
How a Credit Card Against FD Functions
A secured card works similar to a regular credit card. The fixed deposit acts as a security against your card. The financial institution sets your credit card limit depending on the value of the fixed deposit against which you’re getting the card.
As your fixed deposit acts as collateral against your credit card, the issuer has the full right to leverage your asset to recover the dues in case of default. Since they have a safety net in place, the risk for the issuers is reduced.
This way, you have better chances of getting an approval for the card application even if you don’t have an ideal financial profile. Financial institutions will inform you before taking such actions.
Benefits of Getting a Credit Card Against FD
While you understand what a secured credit card is and how it functions, it is essential to check other elements and make the best use of it.
- No Requirement of High Credit History
Before sanctioning a credit card or loan, a financial institution checks your credit history. It gives information on your previous spending and repayment patterns. If you don’t qualify, the financial institution can reject your application.
However, a credit card against a fixed deposit doesn’t need a credit history. You can access this card with a low credit score and slowly build your creditworthiness. This functionality can be beneficial to:
- Seasonal workers or homemakers with unstable income
- Students and new jobbers who don’t have enough history to access a regular credit card
- People new to credit who want a build a history
- Fixed Deposit Continuity
The best part about getting a credit card against FD is that you don’t need to break your deposit. This means that you continue earning interest on the deposit amount. Choosing an institution giving the best fixed deposit rates can add to your benefits.
Apart from that, your secured card come with an interest-free period just like a regular card. This helps you manage payments better and learn how to be responsible with credit card usage. This discipline comes handy later when you get a regular card.
- Lower Interest Rates
A regular credit card charges high interest rates and other penalties. There is a chance of debt accumulation upon multiple defaults. This can negatively affect your credit score.
However, secured credit cards come with low interest rates. So, you don’t need to worry about accumulating high interest amounts in case you’re not able to pay the dues on time. However, paying responsibly on time in full can help you build your credit history.
- Hassle-free Process
Applying for a regular credit card requires numerous documents, including income proof. The process also includes the issuer running a credit score check, that will cross-verify every detail you provide, making it a long and time-consuming process.
Applying for a secured credit card requires less paperwork as you already have a fixed deposit account with the financial institution. It is important to have an account with a financially stable institution. Through that, you can ensure minimum default and choose among the best secured credit cards in India.
- Credit Limit Depends on the FD Amount
You can use a credit card limit linked to your fixed deposit. It is usually a percentage of the FD’s value. You can use it for purchases, bill payments, flight bookings, and various other transactions. Your credit limit serves as your spending cap. This is beneficial since you can enjoy a high credit limit if you have an FD of a high value.
Using a credit card on FD is a boon if you consider all the factors related to its functionality. The FD-backed One Credit Card can be an excellent choice to get a fixed deposit credit card with no joining and annual fee. You can get this premium metal card in no time, and swipe it like a pro by completing a seamless online process.
Get it now to enjoy 5X rewards on your top two spending categories each month. Save with offers on dining, entertainment, shopping, travel, education and fuel. You can access the powerful mobile app and convert your large expenses to no-cost EMIs. Apply now to enjoy the benefits of this lifetime-free credit card!
