5 Reasons why getting a Credit Card against Fixed Deposit might be a Good Idea

5 Reasons why getting a Credit Card against Fixed Deposit might be a Good Idea Credit cards are widely used these days and with the kind of discounts, cashbacks and other exciting benefits they have for the customers, anybody would ask the question why not?. Since it’s a kind of credit, lenders would like to be absolutely sure of your repayment potential and creditworthiness before offering you a credit card. A good income increases the possibility of a sound repayment potential. On the other hand, managing the past or ongoing debt smoothly ensures high creditworthiness. It’s possible for some individuals to not have proof of any creditworthiness because of being new to the world of credit. On top of it, you may also have a poor credit history plagued by delays of defaults. And so, lenders can be a little hesitant in offering you the card. In that case, you can apply for a ​credit card against fixed deposit​ and enjoy shopping.

Let’s scan this offering through this article.

Advantages of Credit Card Against Fixed Deposit The card comes with its own set of benefits, let’s have a look.

Credit Score to Improve Relatively Faster ​- Credit cards offered against the fixed deposit are called secured cards. And, it can be an absolute boon to your credit history by lifting your credit score, which typically ranges from 300-900 in India, faster than otherwise. Yes, the repayment needs to be smooth and time to complement the rewards of a secured credit card. So, if you are plagued with a poor credit history, it won’t be bad to get a credit card on the back of a fixed deposit.

No Annual Fees ​- You must be aware of the fact that ​credit cards​ come with a membership annual fee, which gets levied on a specific date. However, it won’t be the case with most secured credit cards, if not all of them. Now, this is a big draw for secured cards.

No Income Proof Required ​- There’s no need to submit any income proof to grab this card as it is backed against the fixed deposit. So, in case you come to a situation of not able to pay the dues, the lender would take over the fixed deposit from you and take out the sum to recover the outstanding amount.

Lower Interest Rate on Revolving Credit ​- Paying the total dues on or before the due date eliminates the possibility of any interest and tax to add to the bill amount. However, you may sometimes just clear the minimum due or an amount lower than the total dues.

By doing the same, you are letting the credit to revolve. Revolving credit, although not advisable because of the interest and tax charges, can be allowed to carry on with a secured card at lower rates of interest compared to cards without any fixed deposit. The lower rates of interest would further result in lowering the tax. The tax constitutes a certain percentage of the interest amount.

Readily Available​ - There are more than a dozen lenders that offer such credit cards.

Banks like SBI, ICICI Bank, HDFC Bank and others are endorsing such products for long. So, you can apply at any of their ​fixed deposit​ backed credit cards and shop with freedom.

The credit limit of a secured credit card comes in the range of 80%-90% of the fixed deposit sum. So, the bigger the FD amount would be, bigger would be the limit and vice-versa. Well, it may be a positive or negative aspect depending on how you perceive it. However, given the advantages explained above, a secured credit card won’t be a bad take at all if you maintain a good credit discipline by paying off the dues on time.