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Credit Cards Against Fixed Deposits: Who Should Consider Them?

CIOInsider India Team | Friday, 14 February, 2025
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Credit cards can give you financial freedom to some extent. But they are prone to misuse, which may reduce your savings. On the other hand, a fixed deposit helps you build your savings. Surprisingly, there is a way for you to benefit from both simultaneously. You can do this by opting for a credit card and keeping your fixed deposit as collateral.

What are Credit Cards against FD?

A credit card against fixed deposit is a credit card that your bank issues keeping your fixed deposit as collateral. You can only get such a card from a bank with an existing FD. There are many benefits to getting such credit cards. But to understand those, you need to know how such a card works.

How does this Credit Card work?

A credit card against fixed deposit works because the bank keeps your fixed deposit as a security. So, when you default on your credit card bills, the bank will recover this amount from your fixed deposit. You can get a credit limit of up to 75-85% of your fixed deposit amount on these credit cards.

Eligibility Criteria

There are very few stringent eligibility criteria for a credit card against fixed deposits. Some include age, citizenship, fixed deposit status, minimum FD, and credit history.

  • Citizenship: You must be an Indian resident or a Non-Resident Indian (NRI) with an existing address in India.

  • Age: Most banks require applicants to be between the ages of 18 and 65.

  • Fixed Deposit: The bank will expect (or require) the applicant's fixed deposit (already existing with the bank or any other bank). The credit limit on the card will depend upon the amount in the FD.

  • Minimum Deposit: The minimum FD amount required varies from bank to bank, but usually, the minimum FD amount is between ₹10,000 to ₹25,000.

  • Credit History: This usually does not require a strict credit score, which is why it is a good option for people who have yet to establish a credit score or have a bad one.


What are the Benefits?

There are many benefits of taking a credit card against fixed deposit from your bank.

  • Easy Approval

    You do not need a credit history to get these credit cards. If you have an existing FD at your bank, such a card gets approved easily. This is because the risk to the bank is minimal.

  • Building Credit Score

    Using these credit cards, you can start making larger purchases on credit and paying them off regularly. This will build a nice credit score for you each time, which, in the long run, may help you get a personal loan easily.

  • Garnering Interest Continuously

    Even when you use your FD as collateral for such credit cards, you can still keep earning interest on that FD. At the end of the day, you are building savings and having better cash flow throughout the month.

  • Avail Lower Joining Fees

    A credit card against a fixed deposit usually has lower joining fees. Annual fees and other charges are also lower for such cards. If you take out a loan on this card, you may also be offered lower interest rates.

  • Avoid Unnecessary Documentation

    Another benefit is that you do not need to spend too much time on documentation. Since your bank already has all your details from the FD, you only need to provide your FD certificate and proof of identity and address.


Who Should Consider Such a Credit Card?

If you have no prior credit history, these credit cards are for you. They are also for you if you have a low credit score at present. If you are simply looking for a credit card that is approved easily, this option is the best one for you. So, if you want to be able to spend more and keep saving more at the same time, then you should consider taking a credit card against fixed deposit.

Conclusion

A credit card against fixed deposit offers a practical solution if you have a limited credit history or low credit scores. By pledging an FD as collateral, you can secure a credit card and enjoy the various benefits of using credit. With minimal documentation and easy approval, this option provides a flexible and accessible alternative if you want financial flexibility and credit-building opportunities.



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