Credit Card Against a Fixed Deposit?

A credit card against an FD is a unique financial solution for you if you don’t meet the standard eligibility criteria for unsecured credit cards. If you have ever been rejected for a regular credit card because of a low credit score or lack of "Income Proof" (salary slips), a secured credit card is your solution.

In simple terms, it is a credit card backed by a Fixed Deposit (FD). This FD acts as a "security deposit" for the bank. Because the bank has your deposit as a safety net, they do not need to check your past credit history to give you the card.

So in this guide, we will explore the concept of credit cards against fixed deposit accounts, why you would need them, the steps to obtain them, and the eligibility and documentation required.

What is a Credit Card Against an FD Account?

A credit card on FD is a secured credit card issued by a bank against a fixed deposit as collateral. It is a unique financial instrument because an applicant might not qualify for an unsecured credit card that doesn’t require any collateral.

This type of solution is highly beneficial for those credit card applicants who don’t have a commendable credit history. It could also help those who are new to credit. For such applicants, a credit card on FD accounts presents a gamut of opportunities.

This type of credit card is also known as a Secured Credit Card.

How Does a Credit Card Against a Fixed Deposit Work?

Now that you know what a credit card against FD accounts in India is, we’ll understand how they work. 

1. The Deposit

Every bank specifies a minimum FD amount for your credit card application. You open a Fixed Deposit with a bank (starting as low as ₹2,000–₹5,000). When you apply for a credit card against a fixed deposit account, the total amount in your FD is directly proportional to your credit limit.

1. Lien Marking

The bank puts a "Lien" (a temporary lock) on this FD. You cannot withdraw the FD while the card is active, but you keep earning interest on it.

1. Credit Limit 

With a bigger amount in your FD account, you can have a more substantial credit limit. Typically, banks in India offer almost 75% to 85% of the FD amount as your credit card limit. The bank gives you a credit limit based on your FD. 

1. Usage & Repayment

You don’t have to submit any income proof while you are applying for your credit card against the FD. The fixed deposit account acts as the security deposit for your credit card. 

You use it like any other card. When you pay your bills on time, the bank reports this to credit bureaus like CIBIL, helping your score grow. In case of any defaults in credit card repayments, the bank will restrict your rights to break the fixed deposit or impose other criteria.

On the other hand, using a secured credit card well by paying your dues on time and not utilizing the maximum credit limit might allow the bank to delink your FD.

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Why Would You Need a Credit Card Against Fixed Deposit Accounts?

You might be new to credit and not have a good credit history. However, that is not the sole reason to need a credit card against fixed deposits. Here are some other reasons -

• Easier Approval: Since this credit card is secured by your FD, banks are more likely to approve your credit card application. Since the FD is your collateral, you’re most likely to get qualified even if you have a low credit score or a limited credit history.

• Credit Building: Using a credit card responsibly against an FD can help build a good credit score over time. 

• Higher Credit Limit: Such cards might have credit limits that are often a percentage of the FD amount. This potentially offers higher credit limits compared to unsecured cards.

• Interest Benefits: Your FD continues to earn interest, and you can enjoy the benefits of a credit card simultaneously.

What are the Steps to Obtain a Credit Card Against Fixed Deposit?

If you wish to get a secured credit card on FD that gives you better limits, rewards, and more favorable interest rates, you can follow these steps. However, they will vary for non-FD account holders and FD account holders.

For Non-FD Account Holders

Here are the steps a non-FD account holder can follow to get a credit card against an FD - 

• Step 1: Choose the bank that offers a credit card against FD. Most banks in India offer this service.

• Step 2: Visit the nearest branch and open the FD account, followed by the credit card application.

• Step 3: Some banks might offer a complimentary credit card on FD account opening, while others require you to apply for one. So, once your FD account is active, you can apply for the credit card on FD by filling out the application form at the bank branch or online.

• Step 4: Submit the necessary documentation, like your FD account number, account receipt, identity proof, etc.

• Step 5: Once verification and approval are done, the bank will expedite the process, and you will receive your credit card at the address provided.

For FD Account Holders

The steps for an FD account holder to get a credit card against their FD are mentioned below -

• Step 1: If you already have an FD with a specific bank, just apply for the credit card against a fixed deposit account online.

• Step 2: Visit the bank’s website and go to the credit card application section. Provide the necessary details and submit essential documentation.

• Step 3: Once the bank processes your documents successfully, you will receive the credit card at your address within 7-10 working days.

Which Banks Offer a Credit Card Against an FD in India?

In India, most public and private banks offer this feature of applying for a secured credit card against your FD account. Some of the notable ones are:

• State Bank of India

• Bank of Baroda

• Axis Bank

• Kotak Mahindra Bank

• IDFC First Bank

• Yes Bank.

Who Can Get a Credit Card Against an FD in India?

The following individuals can get a credit card against a fixed deposit account in India:

• Individuals with Low Credit Scores

Those who have a low credit score or no credit history can benefit from this type of card.

• New to Credit

Individuals who are new to credit and do not have an established credit history.

• Existing FD Holders

Customers who already have an FD with the bank can easily get a credit card against it.

• Students and Homemakers

Those who might not have a regular income but have a fixed deposit can apply.

• Blacklisted Employees or Residents

Employees of an organisation that is blacklisted by the bank can still apply for a credit card if they have an FD in the bank. Similarly, people in an area that is restricted or blacklisted by the bank can apply for a credit card against an FD account in that bank.

What are the Advantages of Applying for a Credit Card Against an FD?

When you have a linked FD account with your secured credit card, it offers multiple upsides.

• Minimum FD Amount

In India, FDs start from ₹10,000 to ₹20,000 for each bank. This implies that the starting amount to apply for a secured credit card is quite affordable.

• Minimum Documentation

To apply for a credit card, you don’t need to submit your income proof or other documents. Your FD acts as your security for the credit card issuance. As a result, even those without a salary, like a homemaker or a student, can also apply for this credit card.

• Minimum Tenure

Usually, banks consider an FD with at least six months of age as the minimum security for your credit card application.

• Credit Limit

Your credit limits will depend on your FD amount. A higher FD will allow for a bigger credit limit.

• Interest-free Period

Typically, banks in India offer an interest-free period of 48-55 days for secured credit cards.

• Interest on FD

Cardholders can even earn interest on their FDs.

• Rewards

Banks usually offer better incentives and rewards for secured credit cards, like air miles, cashback, online shopping vouchers, etc.

• Access to Other Credit Lines

Once you have built your credit history and have a good credit score, you can apply for other products seamlessly. Since you have an FD account linked, it will also improve your chances of getting an approval when you apply for a personal loan, home loan, auto loan, or other credit lines.

What are the Documents Required to Apply for a Credit Card Against an FD?

In India, banks usually don’t require many documents if you want to apply for a credit card against an FD account. 

• Since you already have an FD account in the bank, the documents provided during its opening will act as the standing documents for your credit card application, like your residential address and other KYC details. 

• You don’t need to furnish any sort of income proof, as your FD account will act as security for your credit card. 

• However, the banks might recheck the validity of the documents, such as your current residential address. 

• If you don’t have a linked FD account and are opening one fresh, you might need to submit your income and address proof to the bank.

What Other Eligibility Criteria Do You Need to Apply for a Credit Card on FD?

To apply for a secured credit card against your FD, you need to meet the following eligibility criteria.

• Minimum FD Amount

Banks usually have a minimum FD amount requirement, often starting from ₹10,000 to ₹20,000.

• FD Account Maturity

Usually, the FD account needs to be at least six months old or more.

• Age Requirement

Applicants must be at least 18 years old. Some banks might require the minimum age to be 21.

• Resident Status

The applicant must be an Indian resident.

• KYC Compliance

The applicant must comply with KYC (Know Your Customer) norms.