When you think of applying for a credit card, you usually consider factors such as your income, credit score, or previous credit history. But what if you don’t meet the typical eligibility requirements for a regular credit card? This is where a credit card against FD can be a smart alternative. It offers a unique opportunity for individuals with limited credit history or those wanting to enhance their creditworthiness without facing rejection. If you’re wondering how this works, here’s a detailed guide on why applying for a credit card against your fixed deposit (FD) can be beneficial.
What is a Credit Card Against FD?
A credit card against FD is a secured credit card issued against the amount you hold in a fixed deposit. Unlike regular credit cards that rely heavily on your credit score, this card uses your FD as collateral. This allows the bank to provide you with a credit line that is generally a percentage of your FD amount. Essentially, this credit card is tied to your fixed deposit, making it easier to access credit even if you have little or no credit history.
Now, let’s explore why opting for a credit card against FD could be the right financial move for you.
- Easy Approval Process
One of the most significant advantages of applying for a credit card against FD is the easy approval process. Since the bank holds your FD as security, they don’t need to run an extensive check on your credit score or income. This makes the approval much faster compared to unsecured credit cards. If you’re someone who is just starting your credit journey or has faced difficulties in getting approved for a regular credit card, this type of card is ideal for you.
- Helps Build or Repair Your Credit Score
A credit card against FD is an excellent way to build or repair your credit score. Every transaction you make using the card is reported to the credit bureaus, helping you establish a credit history. Since it’s a secured credit card, your spending limit is usually linked to the value of your FD, which prevents you from overspending. By making timely payments, you can demonstrate financial discipline, which will positively impact your credit score over time.
For those who have had difficulties maintaining a healthy credit score, a credit card against FD offers a second chance to improve it. As you consistently pay your credit card bills on time, your credit score will gradually improve, allowing you to qualify for better financial products in the future.
- Lower Interest Rates
Since the card is backed by your fixed deposit, the interest rates on a credit card against FD tend to be lower compared to regular credit cards. This can be a significant relief, especially if you occasionally carry a balance on your card. Lower interest rates mean that your debt doesn’t spiral out of control as quickly as it might with an unsecured credit card.
This makes a credit card against FD a safer and more affordable option for those who are looking to manage their finances effectively. Moreover, the interest you earn on your FD continues to accumulate even while it’s being used as collateral, providing you with an additional financial cushion.
- Flexible Credit Limit
The credit limit on a credit card against FD is often flexible and depends on the value of your fixed deposit. Typically, the credit limit is a percentage of the FD amount, ranging from 70% to 90%. This allows you to access more credit without increasing your risk or borrowing costs. The more significant your FD, the higher your available credit.
However, it’s essential to note that since this is a secured card, the bank can use your FD to cover any missed payments, protecting both you and the bank from potential financial strain. Thus, this type of credit card provides flexibility while maintaining financial security.
- Minimal Documentation
Another reason to apply for a credit card against FD is the minimal documentation required. Since you already have a fixed deposit account, the bank doesn’t need much additional information to process your application. Most of the paperwork is reduced to the basics, making the process faster and more convenient.
If you’re tired of submitting multiple documents and undergoing lengthy verification processes, a credit card against FD offers an easier and quicker solution.
- Rewards and Benefits
Just because you are applying for a credit card against FD doesn’t mean you’ll miss out on rewards or benefits. Many secured credit cards come with perks like those offered by unsecured cards. You may enjoy cashback, reward points, and discounts on purchases like dining, shopping, and travel.
Furthermore, some cards offer benefits such as fuel surcharge waivers, zero or low foreign transaction fees, and more. While the specific benefits vary, the overall rewards can be a compelling reason to choose this type of card.
- Secured Yet Convenient
A credit card against FD provides the best of both worlds: security and convenience. Since it is linked to your fixed deposit, you don’t need to worry about the financial risks typically associated with unsecured credit cards. The security of your FD ensures that you’re protected, while the convenience of having a credit card allows you to enjoy the flexibility and purchasing power that comes with it.
For anyone who values financial security while wanting the ease of using a credit card, this option offers an ideal balance.
- No Need to Break Your FD
Lastly, one of the best reasons to apply for a credit card against FD is that you don’t need to break your fixed deposit. Your FD continues to earn interest, while simultaneously serving as collateral for your credit card. This means you get to enjoy the benefits of both—interest on your savings and the purchasing power of a credit card—without liquidating your FD prematurely.
Final Thoughts
Applying for a credit card against FD is an excellent option for those who want to start their credit journey or improve their credit score without the risks and challenges of an unsecured card. It offers an easy approval process, lower interest rates, flexible credit limits, and rewards, all while ensuring that your fixed deposit remains secure. Whether you’re new to credit or looking for a safer way to access credit, a credit card against FD provides a reliable, low-risk solution.