A credit card against FD (Fixed Deposit) is a type of credit card that is secured against a fixed deposit. In this type of arrangement, the credit card issuer holds the fixed deposit as collateral for the credit card, and the credit limit of the card is typically a percentage of the fixed deposit amount.
The advantage of a credit card against FD is that it allows people with limited or no credit history to obtain a credit card. Since the fixed deposit is held as collateral, the credit card issuer faces less risk in extending credit, and therefore may be more willing to issue a card to someone who might not qualify for an unsecured card.
Another advantage of a credit card against FD is that the interest rate on the card may be lower than that of an unsecured card. This is because the credit card issuer has the fixed deposit as collateral, so there is less risk for them.
However, it’s important to note that using a credit card against FD carries some risks. If you are unable to pay your credit card bills on time, the issuer can withdraw funds from the fixed deposit to pay off your outstanding balance. This could result in the loss of your deposit or a reduction in the amount of interest earned on it.
In summary, a credit card against FD can be a good option for those who are new to credit or have limited credit history, but it’s important to use it responsibly and make timely payments to avoid losing your deposit or damaging your credit score.
Benefits of credit card against FD
There are several benefits of having a credit card against FD, including:
- Easy Approval: A credit card against FD is relatively easy to obtain as it is secured by a fixed deposit. The bank already has the security deposit, which makes the process of getting the credit card quicker and simpler.
- No Income Requirements: Since the credit card is secured against the fixed deposit, there is no requirement for a minimum income or a credit score.
- Lower Interest Rate: Interest rates on credit cards against FD are generally lower than those on regular credit cards, as the bank has collateral in the form of the fixed deposit.
- High Credit Limit: The credit limit on a credit card against FD is usually higher than that of a regular credit card, as the bank already has the fixed deposit as security.
- Credit Score Improvement: A credit card against FD can help improve your credit score if you make timely payments. This can be beneficial in the long term when you need a loan or a credit facility.
- Saving on Fees: Credit cards against FD often have lower fees than regular credit cards, such as annual fees, late payment fees, and over-limit fees.
In summary, credit cards against FD offer a simple and secure way to obtain credit. They can also help improve your credit score and save money on fees and interest charges. However, it’s important to use the credit card responsibly to avoid losing your fixed deposit or incurring additional fees.
Fees and charges of credit card against FD
Credit cards against FD typically have fees and charges that are similar to regular credit cards. Here are some of the common fees and charges associated with a credit card against FD:
- Annual fee: Most credit cards against FD charge an annual fee, which is a fee you pay each year for having the card. The annual fee can vary depending on the credit card issuer and the credit limit of the card.
- Interest rate: Like other credit cards, credit cards against FD also charge interest on outstanding balances that are not paid on time. The interest rate can vary depending on the credit card issuer and the credit limit of the card.
- Cash advance fee: If you withdraw cash using your credit card against FD, the bank may charge a cash advance fee, which is usually a percentage of the amount withdrawn.
- Late payment fee: If you do not make the minimum payment on your credit card against FD by the due date, the bank may charge a late payment fee.
- Over-limit fee: If you exceed your credit limit on your credit card against FD, the bank may charge an over-limit fee.
- Processing fee: Some credit card issuers charge a processing fee when you apply for a credit card against FD.
- Prepayment penalty: If you pay off your credit card against FD before the end of the term, some banks may charge a prepayment penalty.
It’s important to review and understand the fees and charges associated with your credit card against FD before applying for the card. This will help you avoid any surprises and manage your finances better.
Who should apply for credit card against FD?
Credit cards against FD are a good option for individuals who are looking to build their credit score, have a low credit score, or have no credit history. Here are some examples of people who may benefit from a credit card against FD:
- First-time credit card users: Individuals who are new to credit or have no credit history can benefit from a credit card against FD. As the credit card is secured against the fixed deposit, it is easier to obtain and can help build a credit history.
- Individuals with a low credit score: If you have a low credit score, it can be challenging to get a regular credit card. A credit card against FD can be a good option as it is secured and does not require a good credit score.
- Individuals with a limited income: Credit cards against FD do not have any minimum income requirements. Therefore, it can be a good option for individuals who have a limited income.
- Individuals who want to save on interest: Credit cards against FD typically have lower interest rates compared to regular credit cards. Therefore, if you plan to carry a balance on your credit card, a credit card against FD can help you save on interest charges.
- Individuals who want to earn interest on their savings: With a credit card against FD, you earn interest on your fixed deposit while also using the credit card. This can be a good option for individuals who want to earn interest on their savings while also having access to credit.
In summary, credit cards against FD are a good option for individuals who want to build their credit history, have a low credit score, or have limited income. It can also be beneficial for individuals who want to save on interest charges or earn interest on their savings. However, it’s essential to use the credit card responsibly to avoid losing your fixed deposit or incurring additional fees.
Banks offering credit card against FD in India
Several banks in India offer credit cards against fixed deposits. Here are some of the popular banks offering credit cards against FD in India:
- State Bank of India (SBI)
- HDFC Bank
- ICICI Bank
- Axis Bank
- Kotak Mahindra Bank
- Punjab National Bank (PNB)
- IDBI Bank
- Canara Bank
- Bank of Baroda (BOB)
- Central Bank of India
The eligibility criteria, credit limits, and fees and charges for credit cards against FD can vary between banks. It’s important to compare the features and benefits of different credit cards against FD before applying for one. It’s also essential to read the terms and conditions carefully to understand the fees and charges associated with the credit card.
How to apply for credit card against FD?
Here are the steps to apply for a credit card against FD:
- Choose the bank: Select a bank that offers credit cards against FD that suits your needs.
- Check the eligibility criteria: Check the eligibility criteria for the credit card, including the age, income, and fixed deposit requirements.
- Open a fixed deposit account: If you do not have a fixed deposit account with the bank, open a fixed deposit account and deposit the required amount.
- Fill out the application form: Download the credit card application form from the bank’s website or visit the nearest bank branch to obtain the application form. Fill out the application form with accurate details.
- Submit the required documents: Along with the application form, submit the required documents, including proof of identity, proof of address, proof of income, and the fixed deposit receipt.
- Wait for verification: The bank will verify the documents and the fixed deposit account. The verification process can take a few days.
- Receive the credit card: Once the verification process is complete, the bank will issue the credit card against the fixed deposit. You will receive the credit card by mail or can collect it from the nearest bank branch.
It’s important to read the terms and conditions of the credit card and understand the fees and charges associated with it. Use the credit card responsibly to avoid losing the fixed deposit and incurring additional fees.
Conclusion
In conclusion, credit cards against fixed deposits can be a good option for individuals who are new to credit or have a low credit score. They are also beneficial for individuals who want to save on interest charges or earn interest on their savings. Several banks in India offer credit cards against fixed deposits, and the application process involves opening a fixed deposit account, filling out the application form, submitting the required documents, and waiting for verification. It’s important to compare the features and benefits of different credit cards against FD and read the terms and conditions carefully before applying for one. Using the credit card responsibly is crucial to avoid losing the fixed deposit and incurring additional fees.