A Guide to Best Credit Cards Against FD in 2024
Credit cards are an essential financial tool for many, providing convenience and security in transactions. However, not everyone meets the eligibility criteria for a traditional credit card. This is where a credit card against a fixed deposit (FD) comes into play. In this guide, we will explore how you can benefit from a credit card against FD in 2024.
Credit Card Basics
What is a credit card against fixed deposit?
A credit card against a fixed deposit is a type of secured credit card. It is backed by the money you have put into a fixed deposit account. This form of credit card is ideal for individuals with a low credit score or limited credit history, as it mitigates the risk for the issuer by using your FD as collateral. When you get a credit card against an FD, you are essentially leveraging your savings to access the convenience and benefits of a credit card.
Key Takeaway: A credit card against an FD offers an accessible solution for those who might not qualify for a traditional credit card due to low credit scores or insufficient credit history.
How do credit cards work?
Credit cards, including those against fixed deposits, function similarly to unsecured credit cards. When you apply for a credit card, the issuer sets a credit limit based on your fixed deposit amount. This limit typically ranges between 70% to 90% of the FD amount. You can use the credit card for various transactions up to this limit. Monthly statements will reflect your spending, and timely repayments will help improve your credit score over time.
Key Takeaway: Credit cards against FDs operate like regular credit cards but are secured against your fixed deposit, offering flexibility and a chance to build or repair credit.
What are the eligibility criteria for credit cards against fixed deposit?
To obtain a credit card against a fixed deposit, you must meet certain eligibility criteria. Primarily, you need to be an Indian resident with a valid address and fall within the age bracket specified by the issuer, usually between 18 and 65 years. You must also have an existing FD account with the issuing bank or be willing to open one. The minimum deposit amount required varies by bank but generally ranges from ₹75,000 to ₹1,00,000 or more. Meeting these criteria ensures that the bank can secure your credit card against your fixed deposits, minimizing their risk.
Key Takeaway: Meeting the eligibility criteria, such as having an FD account and being within the specified age range, is essential to qualify for a credit card against a fixed deposit.
Features and Benefits
Credit cards on FD, also known as secured credit cards, offer a unique opportunity for individuals with low credit scores or no credit history to enjoy the benefits of a credit card. By using your fixed deposit (FD) as collateral, you can get a credit card that functions like any other, but with added security for the issuer. In this section, we'll explore the features and benefits of these cards.
What is the credit limit on these cards?
The credit limit on FD-based credit cards is determined by the amount in your fixed deposit account. Typically, banks offer a credit limit ranging from 70% to 90% of your FD amount. For instance, if you have a fixed deposit of ₹100,000, your credit limit may be between ₹70,000 and ₹90,000. This limit ensures that the card issuer is safeguarded while you enjoy the flexibility of using a credit card. It’s important to note that the credit limit varies depending on the issuing bank's policies.
Key Takeaway: The credit limit on secured credit cards is a percentage of your FD amount, providing a balance between flexibility for the user and security for the issuer.
How do secured credit cards help in building credit?
Secured credit cards are an excellent tool for building or repairing credit. By using a credit card on FD responsibly—making timely payments and keeping your balance low—you can demonstrate good credit behavior to the credit bureaus. This positive credit history can improve your credit score over time, making it easier to qualify for unsecured credit cards and loans in the future. Additionally, secured credit cards are reported to credit bureaus just like regular credit cards, ensuring your credit-building efforts are recognized.
Key Takeaway: Using a secured credit card responsibly helps build or repair your credit score, paving the way for future financial opportunities.
What is the minimum FD amount required for such cards?
The minimum FD amount required for a credit card on FD varies across different banks. Generally, the minimum fixed deposit amount starts at around ₹75,000 but can go higher depending on the issuing bank’s policies. For example, banks like ICICI Bank and Kotak Mahindra Bank have specific minimum deposit requirements to obtain their FD-based credit cards. This ensures that the bank has sufficient collateral to issue a credit card while offering you the benefits of a secured credit line.
Key Takeaway: The minimum fixed deposit amount required for secured credit cards varies by bank, typically starting around ₹75,000, ensuring adequate collateral for the card issuer.
Application Process
Applying for a credit card against a fixed deposit (FD) is straightforward and can be done online, providing a convenient option for those looking to build or improve their credit. Here, we will guide you through the application process, the necessary documents, and the approval timeline.
How to apply for a credit card against FD online?
Applying for a credit card against an FD online is simple. First, ensure you have an existing FD with the bank offering the credit card or be prepared to open one. Visit the bank's website and navigate to the credit card section. Select the option for a credit card against FD and fill out the application form with your details. Submit the form and wait for the bank to process your request. The process is similar across different banks, but it's advisable to check specific requirements as they can vary from one bank to another.
Key Takeaway: Applying for a credit card against an FD online is a straightforward process involving filling out an application form on the bank’s website and submitting the necessary details.
What are the documents needed to apply for such cards?
To apply for a credit card against your fixed deposit, you will need to provide several documents. These typically include proof of identity (such as an Aadhaar card or PAN card), proof of address (like a utility bill or rental agreement), and your FD receipt or account details. Some banks might also require income proof, though this is less common for FD-backed credit cards. Ensuring you have these documents ready will streamline the application process.
Key Takeaway: Having the necessary documents, including proof of identity, address, and FD details, is crucial for a smooth application process for a credit card against FD.
How long does it take to get approval for these cards?
The approval timeline for credit cards against FD can vary but is generally quicker than traditional credit cards. Once you submit your application and documents, the bank will verify your details. This process can take anywhere from a few hours to a couple of days, depending on the bank. Some banks even offer instant approval if you meet all the criteria and have the required documents in order. After approval, the credit card is usually dispatched within a week.
Key Takeaway: The approval process for a credit card against FD is typically faster than traditional credit cards, often taking just a few days if all documents are in order.
Fees and Charges on Types of Credit Card
Understanding the fees and charges associated with credit cards on FD is crucial for managing your finances effectively. These cards offer various benefits, but it’s essential to be aware of the costs involved to make an informed decision.
What are the credit card variants available for FD holders?
Banks offer several credit card variants for FD holders, catering to different financial needs and preferences. These variants include basic secured credit cards designed to help build your credit history, as well as premium options that provide higher credit limits and additional perks like reward points, cashback, and travel benefits. The availability of these variants varies from one bank to another, so it's advisable to check with your card issuer for the options that best suit your requirements.
Key Takeaway: Various credit card variants are available for FD holders, from basic cards to premium ones with higher credit limits and additional perks, varying by bank.
What fees are associated with these credit cards?
Credit cards against FDs come with a range of fees, including annual fees, processing fees, and charges for late payment of credit card bills. The annual fee for a secured credit card is typically lower than that of an unsecured card. However, it is essential to be aware of other potential charges, such as over-limit fees, cash advance fees, and foreign transaction fees. These fees vary from one bank to another, so it’s important to read the terms and conditions provided by the card issuer before applying.
Key Takeaway: Be mindful of the various fees associated with FD-based credit cards, such as annual, processing, and late payment fees, which can vary significantly between banks.
How do credit card dues work for FD-based cards?
Credit card dues for FD-based cards operate similarly to traditional credit cards. You will receive a monthly statement detailing your transactions and the total amount due. It is crucial to pay at least the minimum due amount to avoid penalties and maintain a good credit score. Timely repayment of credit card dues not only helps in building your credit history but also ensures that the benefits of a secured credit card are maximized. Failure to repay the dues can result in penalties and affect your FD as it serves as collateral.
Key Takeaway: Managing credit card dues responsibly is key to building a good credit history and avoiding penalties, ensuring you maximize the benefits of your FD-based credit card.
FAQs about Credit Cards on FD
What is a credit card against FD? A credit card against FD is a secured credit card where your fixed deposit serves as collateral. This type of credit card is ideal for individuals with low credit scores or limited credit history, providing them with an opportunity to build or improve their credit score.
How can I apply for a credit card against FD online? You can apply for a credit card against FD online by visiting the website of the bank offering the card. Fill out the application form with your details and submit the required documents. The bank will process your application and, upon approval, issue the credit card.
What is the minimum FD amount required to obtain a credit card against FD? The minimum FD amount required varies from one bank to another, but it generally starts around ₹75,000. It’s best to check with your bank for their specific requirements.
What fees are associated with credit cards against FD? Fees associated with credit cards against FD include annual fees, processing fees, and charges for late payment of credit card bills. Other potential charges may include over-limit fees, cash advance fees, and foreign transaction fees.
How does the credit limit for a credit card against FD work? The credit limit for a credit card against FD is typically a percentage of your fixed deposit amount, usually ranging from 70% to 90%. For example, if you have an FD of ₹100,000, your credit limit might be between ₹70,000 and ₹90,000.
Can I use a credit card against FD to improve my credit score? Yes, using a credit card against FD responsibly—making timely payments and keeping your balance low—can help improve your credit score. This type of card is reported to credit bureaus, allowing you to build a positive credit history.
Fun Fact
Did you know that using a credit card against FD not only helps build your credit score but can also earn you interest on your fixed deposit at the same time? This dual benefit makes FD-based credit cards a smart financial tool for those looking to maximize their savings and credit potential simultaneously.
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