Credit Card Against Fixed Deposit: Advantages and How to Save Maximum

A credit card against fixed deposit can be an optimal choice for many reasons. When you find it hard to meet the eligibility criteria for a regular credit card, you can pledge your deposit to procure an FD-backed credit card.

This type of card is also known as a secured credit card. It is similar in function to a traditional credit card – except that it guarantees you approval. Understanding its mechanism and advantages can help you utilise it to maximise your savings.

Brief Understanding of Credit Cards Against FD

For these cards, the deposit amount acts as financial security for the issuer. You can access such credit cards by meeting simple eligibility criteria. Some of the most common criteria you must meet are:

1. Be older than 18 years of age
2. Have a fixed deposit account with a minimum tenure of 6 months
3. Be an Indian resident

These cards require minimal documentation once you satisfy these criteria. 

While applying for a regular credit card, issuers require you to meet strict criteria like credit score and certain income thresholds. However, you can get a secured credit card irrespective of the following:

• Occupation
• Credit score
• Income stability

These cards can be ideal for:

• Seasonal workers without stable incomes, like freelancers 
• Homemakers
• Students or new employees without any credit history and income proof
• Those who have low credit scores due to a default and want to build a better history 

How Secured Credit Cards Work

For a credit card secured against a fixed deposit, the issuer holds the deposit as collateral. The deposit also decides the credit limit of your card. Depending on the credit card issuer, the credit limit can be 75-80% of the fixed deposit. 

Some issuers can provide up to 90% or even 100% of the deposit as a credit limit. The issuer also considers certain points such as age, income and others while determining the credit limit.

With these cards, you can buy now and pay later as per the billing cycle. However, you must pay before the due date to avoid interest charges. Upon multiple payment defaults, the issuer can liquidate the deposit amount. 

You can get a regular credit card by maintaining a good credit history and establishing healthy credit habits. In this way, a secured card can be like a stepping stone towards greater financial flexibility. 

How to Maximise Savings Using Secured Credit Cards

There are numerous benefits attached to such a card, including its easy application process. Apart from that, you can use it to maximise your savings as well by following the given tips:

Utilising the Interest-free Period

Fixed deposit-backed credit cards also have an interest-free period like a traditional credit card. When you make a purchase, you can pay the bill within the interest-free period. This can vary depending on the financial institution. That way, you can avoid paying interest on purchases, maximising your savings.

Earning Interest on Fixed Deposit

While enjoying the perks of a secured credit card, you can earn interest on the fixed deposit simultaneously. In contrast, traditional credit cards do not have such provisions.

Having a fixed deposit can offer added benefits, like interest rates compounding over time. You can earn interest not only on the principal amount but also the interest amount.

Lower Interest Rate

Most financial institutions provide a fixed deposit credit card at a lower interest rate. In case of failure of payment due to unforeseen conditions, you pay a relatively lower amount as interest.

For large payments, you can opt for the EMI option. In that case, the lower interest rate plays a major role in helping you save money.

Using the Perks

Compared to a regular credit card, a credit card against a fixed deposit has fewer rewards 

. However, many financial institutions provide points, discounts and cashback on transactions. Using these benefits can make a difference as you can utilise them to lower other expenses.

For example, you can use the reward points while paying a restaurant bill or booking a fight ticket. By analysing your spending habits and lifestyle, select a credit card that aligns with your needs.

There are several secured credit cards available in the market. You can open a fixed deposit account with the minimum required amount and then apply for a credit card. That’s exactly what you get with the One Credit Card’s FD-backed option. Book an FD of just ₹5,000 to instantly qualify for the card.

Moreover, you earn 5X monthly rewards on the top two spending categories, which you can use to save on future transactions. Using its full-stack mobile app allows you to check offers near you via GPS, ensuring you never miss out on discounts. Download the App or visit the website to apply now!