A credit card against a fixed deposit, also known as a secured card, is designed for applicants with low credit scores. Apart from the fact that you need to provide security, it works like any other credit card.
When applying for a regular credit card, there are many things you check to ensure you maximise your benefits. This includes comparing the reward points, welcome benefits, lounge access, etc. But how do you ensure maximum benefits on a credit card against a fixed deposit? Here’s how.
Deposit Amount
Whenever you get an FD-backed credit card, it is best to opt for the one offering you the maximum credit limit. Generally, you can get up to 85% – 90% of your deposit amount as a credit limit, but some issuers also offer a 100% limit.
Selecting a card with a higher limit allows you to utilise the maximum of your deposit amount. In a regular credit card, the credit limit increases periodically with good credit behaviour. However, with a secured credit card, you cannot increase your credit limit once you have booked the deposit. Therefore, it’s important to choose the right option from the beginning.
Credit Bureau Reporting
Not all credit card issuers report your good repayment behaviour to the credit bureaus. This is because reporting to the credit bureau is a cost-intensive process. If they don’t report your good credit repayment behaviour to the issuer, your score will not improve.
Since this type of credit card is a preferred option to increase credit score, it’s imperative to check for credit reporting. In addition, you should know which bureau they report to, as CIBIL is the most popular one in India.
Nominal Fees and Charges
A secured credit card attracts charges similar to those of an unsecured credit card. Thus, when choosing the best option, always compare the lowest rate to keep the borrowing cost to the minimum. Here are some common charges that you can compare:
- Interest rates on credit card
- Interest rate that you get to earn on your fixed deposit
- Joining and annual fees
- Late payment fee
- Overdraft charges
- International transaction fee
- Forex charges
- ATM withdrawal fee
- Balance transfer fee
- Card replacement fee
- Rewards redemption Fee
- EMI conversion charges, etc.
Potential to Upgrade
Secured credit cards are not a long-term financial tool, as they are generally used as a ladder for building credit. Therefore, some issuers also offer you the option to upgrade your credit card from a secured version to an unsecured one. This happens when you build a sufficient credit score that meets the issuer’s eligibility criteria.
With this option, you do not have to reapply for a new card. You can maintain the same account and enjoy the benefits of a regular credit card. Additionally, you also have the option to close your fixed deposit account or continue the investment to maximise your earnings.
Credit Card Perks
An ideal secure credit card should give you maximum benefits, similar to any regular credit card. Some of the perks you should look for to enjoy the best of credit card facilities include:
- Grace period
- Discounts
- Cashback
- Reward points
- Fuel charge waiver
- Complimentary airport lounge access
- EMI option
- Low forex markup
- Insurance coverage
- Credit card app to track expenses
- Emergency services
- ATM cash withdrawal facility
- Add-on credit card
- Air miles and more
Reasons to Opt for a Secure Credit Card
Here’s why you should get a credit card against your FD account.
- If you are not eligible to apply for an unsecured type of credit card due to a lack of credit history or a low credit score
- If you are recently employed or without income proof and require urgent finances
- If you do not have a stable income source, such as a freelancer or part-time worker
- If you want a credit card to enjoy the rewards and discounts
- If you want to learn how to manage credit cards responsibly
After evaluating all these points, you can decide whether or not a credit card against an FD is a good option. If you plan to get one, simply go for the One Credit Card, which gives you 100% of your deposit as a credit limit.
With this card, you get amazing benefits, such as 5X reward points on the top two spending categories in a month. You can also enjoy the no-cost EMI facility, choose from many lucrative offers, shop with a virtual credit card and get partner discounts. You can book a deposit starting from an amount as low as ₹5,000. Once you have built a good credit profile, simply upgrade to the regular option to enjoy a better credit limit as per your eligibility. To get this lifetime-free, metallic credit card, apply online.
