VMPL
New Delhi [India], August 6: Access to a credit card often depends on factors such as credit history, repayment behaviour, and income. For first-time applicants or individuals with no credit history, meeting these eligibility requirements can be challenging.
A fixed deposit credit card offers an alternative. Instead of relying primarily on an existing credit profile, the card is issued against a fixed deposit that serves as collateral. This allows eligible customers to access credit while continuing to earn interest on their deposit.
What is a credit card against fixed deposit?
A credit card against a fixed deposit, also known as an FD-backed credit card, is issued against a fixed deposit held with the bank. The fixed deposit serves as collateral, and the credit limit is based on the deposit amount, making it a suitable option for customers looking to access credit against their savings.
The card functions like a regular credit card and can be used for merchant payments, online purchases, utility bill payments, and other eligible transactions. Cardholders receive a separate credit limit linked to the fixed deposit, while the deposit itself continues to earn interest according to its applicable terms.
Benefits of choosing a fixed deposit credit card
1. Easier access to credit
A fixed deposit credit card provides access to credit for individuals who have no credit history. Since the fixed deposit serves as collateral, it can be a suitable option for students, young professionals, and first-time credit users looking to enter the formal credit system.
2. No extensive credit checks or income verification
Unlike unsecured credit cards, an FD-backed credit card does not rely heavily on income verification or an established credit history because the fixed deposit acts as security for the card. This simplifies the eligibility process for many applicants.
3. Opportunity to build a credit history
Many issuers report repayment information to credit bureaus. Regular card usage and timely repayment of outstanding dues help establish a positive credit history, which can support future credit applications.
4. Your fixed deposit continues to earn interest
The linked fixed deposit remains invested and continues to earn interest according to its applicable terms while serving as collateral for the credit card.
Things to consider before applying
Before choosing a fixed deposit credit card, review the minimum fixed deposit requirement, eligible tenure, applicable fees, billing cycle, repayment terms, finance charges, and the percentage of the fixed deposit available as the credit limit.
It is also important to understand that the fixed deposit remains under lien while it secures the card. The credit card bill must be paid separately, and the linked deposit is used only in accordance with the issuer's terms if outstanding dues remain unpaid.
Conclusion
In a financial landscape characterised by convenience and accessibility, fixed deposit credit cards offer a practical solution for individuals looking to establish their credit history. By using a fixed deposit as collateral, these credit cards provide access to credit while encouraging responsible usage and timely repayments. They combine the advantages of a secured credit facility with the flexibility of a regular credit card for eligible transactions. Understanding the features, eligibility requirements, and repayment terms can help you choose a card that aligns with your financial needs.
Frequently Asked Questions
1. What is a fixed deposit credit card?
A fixed deposit credit card is a secured credit card issued against a fixed deposit, with the deposit serving as collateral for the credit limit.
2. Does the fixed deposit continue to earn interest?
Yes. The linked fixed deposit continues to earn interest according to its applicable terms while it serves as collateral.
3. Can a fixed deposit credit card help build a credit history?
Yes. When repayment information is reported to credit bureaus, timely repayments and responsible usage contribute to building a credit history.
(ADVERTORIAL DISCLAIMER: The above press release has been provided by VMPL. ANI will not be responsible in any way for the content of the same.)
