Credit Cards Against Fixed Deposit (FD)

How Does a Secured Credit Card Work?

A Credit Card against a Fixed Deposit is a secured Credit Card issued against the amount kept in a Fixed Deposit account, which serves as collateral. It is an ideal option for individuals with limited or no credit history, as well as those with low credit scores. Like a regular Credit Card, it comes with a pre-approved credit limit that can be used for purchases and other transactions. 

Features of a Credit Card against Fixed Deposit

The features of credit card against fixed deposit are mentioned below: 

• Affordable FD amount - The minimum fixed deposit amount usually ranges from Rs.10,000 to Rs.20,000 and is hence affordable.
• Credit limit - Credit limit offered on secured credit cards typically depends on the fixed deposit amount. Generally, banks offer 75% to 85% of the deposit amount as total credit limit on the card.
• Minimum documentation - To apply for secured credit cards, you do not need to submit a lot of documents.
• Minimum tenure - The minimum tenure of the fixed deposit that you are giving as security to the bank should be six months.
• Interest free period - Generally, banks offer an interest free period of 48 days to 55 days on secured credit cards.
• Rewards - These cards offer multiple rewards such as reward points, cashback, etc., to the customers.
• Interest on fixed deposit - Cardholders will continue earning interest on their fixed deposit.

Benefits of Having a Credit Card Against Fixed Deposit

A Credit Card against a Fixed Deposit offers easy access to credit while helping you build financial discipline and enjoy various card benefits. 

• Easy Approval: Suitable for individuals with limited or no credit history.  

• Credit Score Building: Timely repayments help establish and improve your credit profile.  

• No Income Proof Needed: Usually available without submitting income or employment documents.  

• Continued FD Growth: Your Fixed Deposit continues to earn interest even when pledged as collateral.  

• Emergency Financial Support: Provides access to a credit limit without breaking your FD.  

• Interest-Free Grace Period: Enjoy a repayment window with no interest charges if dues are paid in full by the due date.  

• Rewards and Cashback: Earn reward points or cashback on eligible transactions.  

• EMI Conversion Facility: Convert eligible purchases into convenient monthly instalments.  

• Easy Account Management: Monitor transactions, payments, and card usage through digital banking channels. 

Who Should Apply for a Credit Card Against a Fixed Deposit?

To apply for a Credit Card against a Fixed Deposit, you must meet the following eligibility requirements: 

• Indian Resident: Must be an Indian citizen residing in India with a valid residential address.  

• Age Requirement: Must be between 18 and 75 years of age.  

• Fixed Deposit Account: Must have an existing Fixed Deposit or open a new one with the issuing bank.  

• Minimum FD Amount: A minimum Fixed Deposit of Rs.15,000 is required.  

Important Conditions 

The Credit Card may not be issued under the following circumstances: 

• Fixed Deposit amount is less than Rs.15,000.  

• Fixed Deposit tenure is less than 1 year.  

• PAN is not updated or is inoperative.  

• The Fixed Deposit falls under restricted categories such as:  

• Tax Saver FD  

• NRI FD  

• Minor's FD  

• Lien-marked FD  

• Sweep-in FD  

• Non-withdrawal FD 

How to Apply for a Credit Card Against Fixed Deposit

For non-FD account holders: If you wish to apply for a secured credit card, you need to have a fixed deposit account with the respective bank.

Applying for a Credit Card against a Fixed Deposit is a simple process that involves opening an FD, submitting an application, and completing the verification requirements. 

• Open a Fixed Deposit: Create a Fixed Deposit account if you do not already have one and choose an amount that supports your desired credit limit.  

• Submit the Application: Apply for the Credit Card online or through a branch by filling in the required details.  

• Complete KYC Requirements: Provide identity proof, address proof, and Fixed Deposit details for verification.  

• Receive Approval and Card Issuance: After document verification and approval, the Credit Card is issued against the Fixed Deposit. 

Note: reach out to the preferred bank by either visiting physically or via bank website, as some banks allows paperless application  For FD account holders: If you already have a fixed deposit account with the bank from which you would like to avail the secured credit card, you can simply apply online by visiting the bank’s website. 

Key Factors to Consider Before Getting a Secured Credit Card

While an FD-backed card is a great entry point into the world of credit, there are several critical trade-offs to be aware of.

• Minimum Fixed Deposit (FD) Amount: Most banks require a minimum deposit to issue a secured card, sometimes starting from ₹2,000, though the exact amount varies by bank and a higher FD may unlock cards with better benefits.

• Your Credit Limit is Tied to the FD: Banks usually provide a credit limit that is about 75%–90% of your FD amount rather than the full deposit, meaning a ₹50,000 FD might give you a credit limit of around ₹40,000.

• Your Fixed Deposit Funds are Locked: The FD amount used to secure the card remains completely blocked while the card is active, and you can access it only after closing the card and clearing all outstanding dues.

• The Serious Risk of Default: If you fail to repay your credit card dues, the bank can liquidate your fixed deposit to recover the amount, which may also lead to loss of interest and damage to your credit score.
• Fees and Charges: Review joining fees, annual fees, interest rates, forex mark-up charges, and any penalties related to the Fixed Deposit. 
• Rewards and Benefits: Look for features such as cashback, reward points, fuel surcharge waivers, dining offers, or savings on digital payments.  
• Digital Banking Features: Prefer cards that offer online application, quick approval, mobile app access, spending alerts, digital statements, and easy repayment options.  
• Transparency: Ensure the card comes with clear terms, conditions, and fee disclosures to avoid unexpected charges. 

Summary

A credit card against a fixed deposit is a secured credit card that uses your FD as collateral, making it ideal if you have a limited or poor credit history. BankBazaar's comparison of top FD-backed cards from SBI, IDFC FIRST, Kotak, Axis, Bank of Baroda, DCB, AU Small Finance Bank and SBM Bank helps you match your deposit size to the right card. Review the fees, credit limit and default risk of each card carefully before you apply. 

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