Credit cards come in handy helping us meet a number of financial transactions such as making online payments, paying for shopping and also help us withdraw cash whenever there arises a need. But to be eligible for getting a credit card from a financial entity, you need to meet some of their very basic criteria such as some regular flow of income i.e. minimum salary in a year or a proof of your income, reasonable credit score.
Also, these entities take into account your past credit history, your capacity to repay against credit card withdrawal or payments and also your place of residence as residents of a blacklisted area are not issued a card.
Credit card issuers also consider an applicant's debt to income ratio and quantum of fixed deposit.
So, if you are also among those who feel a genuine need of a credit card but are unable to secure it due to one or the other reason such as low salary or poor or no credit score, you with fixed deposits in the bank can now easily secure a secured credit card against fixed deposit. Herein the fixed deposit serves as collateral and thus all other factors that otherwise are crucial for a bank when it comes to issuance of a credit card no longer remain important. As banks in case of default by the credit card holder can get their money back, extended as credit by liquidating these FDs.
The Credit Limit For Credit Card Against FDs
Banks decide the credit limit of the customers on the basis of the percentage of the amount of the fixed deposits they have with the issuing bank. Upon issuance of the credit card, the issuer marks a lien on the fixed deposit amount till the card is held with the customer. Usually for secured credit cards against fixed deposit, the credit card limit is up to 85% of the FD amount.
Interest Rates On Credit Cards Against FDs
Against the credit card spends which are short-term loans, re-payments have to be made at the prescribed rate of interest. And usually, if customers pay the outstanding amount in full every month, on or before the due date, they are not charged the interest rate. So, as unlike regular credit cards these credit cards are secured in nature, these come with a lower rate of interest.
For example, ICICI Bank Instant Platinum Credit Card, the secured credit card of ICICI Bank charges an APR of 29.88%. APR is the amount of interest that a customer pay on any money borrowed. Other unsecured credit cards of the bank charge an APR of 40.8%. This APR is charged if the credit card customer misses the due date.
Features Of Credit Cards Offered Against FDs
Minimum FD amount: For you to be eligible to secure a secured credit card, the minimum quantum of FD you should have is Rs. 20,000
Minimum paperwork: Not much documentation is needed and the bank upon issuance of the credit card marks a lien on the FD amount for the advance extended against the investment.
Minimum Tenure: The FD i.e. being kept with the bank as a security or collateral should have a minimum tenure of 6 months.
Interest-free period: For these cards, the interest-free period is higher than regular credit cards i.e. of between 48 days to 55 days.
Interest on Fixed Deposit: Cardholders will continue earning interest on their fixed deposit.
Who Should Opt For Credit Cards Against Fixed Deposits?
Retirees with no regular income source
Individuals in entry-level jobs
People who are denied unsecured credit card due to a low salary or credit score or no credit history
People residing in areas which financial institutions have blacklisted
People who are employed by organizations that are blacklisted by the lender or have a bad reputation.