Some of the banks in India do offer credit card against the fixed deposits of the investors. But is it ideal to go for it? As generally, banks do a thorough analysis of the credit score of the applicant, job profile, income of the applicant before issuing any of the credit cards. There have been umpteen instances wherein the banks have rejected the applicant's request for issue of a credit card citing low credit score, risky job profile and so on.
But if you are having a fixed deposit in a bank and apply for a credit card, then you can apply for the secured credit cards offered by banks.
Many leading banks in India including the State Bank of India, Axis Bank, Kotak Mahindra Bank and Bank of Baroda do offer credit cards against fixed deposits of their customers. In such cases, the fixed deposit of the customer will act as collateral security on which the credit card will be issued and these cards can be obtained by depositing as low as Rs 15,000 in a fixed deposit based on the bank's preset rules and regulations.
Usually, the bank will set a credit limit in the range between 80 - 90 per cent of the fixed deposit amount.
Who Should Apply for Credit Card Against Fixed Deposits (FDs)?
- The secured credit card against the fixed deposits is optimal for the following individuals
- Individuals with an irregular income
- House makers
- Individuals with a poor credit history or poor credit score
- Individuals with low income (entry-level jobs)
- Individuals with no income proof
Advantages of Credit Card Against Fixed Deposit
- It comes with lower interest rates as against the unsecured credit cards.
- This card will be ideal for those who are having a poor credit score, senior citizens, homemakers, individuals with poor credit history, low-income individuals, people with irregular income or no income proof.
- Some of the banks will not charge joining fee or annual renewal fee from the customers for availing credit card against fixed deposit.
- The credit card is secured against a fixed deposit of the applicant.
- The credit card fee will be slightly less or nil in some banks.
- The credit limit on the card will not be decided by the bank but it mainly depends on the fixed deposit amount the applicant has deposited in the bank.
- Income proof is not required to secure the card.
- No paperwork will be required to obtain the card.
Disadvantages of Credit Card Against Fixed Deposit
- As fixed deposit will be linked to the credit card, the deposited amount cannot be considered as a liquid asset.
- Post maturity also, the depositor will not be able to use the linked credit card for conducting transactions and one has to apply for a new credit card on the maturity of the said fixed deposit.
- Lack of diverse choices in case of FD linked credit card as against the regular credit cards.
- Those fixed deposits cannot be used for premature withdrawal in case of an emergency.
- If the cardholder fails to pay the outstanding dues, then it will bring down the credit score significantly.
- The bank will have the right to take over the fixed deposit if in case the outstanding dues are not paid on time.