Credit Card Against FD: Full Guide for First-Time Applicants

Key Takeaways

• An FD-backed credit card uses a fixed deposit as collateral while providing a separate credit facility.
• First-time applicants can access credit without relying solely on an established credit history.
• Responsible card use and timely repayment can help establish credit history when repayment activity is reported.
• Applicants should compare minimum FD requirements, credit limits, fees, repayment terms, and lien-related terms.

Getting a credit card for the first time can be difficult when you have limited or no credit history. An FD-backed credit card offers an alternative by using an existing fixed deposit as security for the credit facility.

The card is secured against the value of the FD, with the issuer setting eligibility and credit-limit conditions based on its applicable terms. The deposit remains with the bank while you receive a separate credit limit to make eligible transactions.

What Is an FD-Backed Credit Card?

An FD credit card is a credit card secured against a fixed deposit. The FD acts as collateral for the card, while the cardholder receives a credit limit based on the value of the deposit and the issuer's terms.

The FD remains invested and continues to earn interest according to its applicable terms while it is linked to the card. Your card spending is separate from the FD, so purchases made using the card are not directly deducted from the deposit.

How Does a Credit Card Against FD Work?

When you apply for a credit card against FD, you create or link a fixed deposit with the card issuer. The bank places the deposit as security and provides a credit limit against it.

For example, if a card issuer sets the credit limit at 80% of the FD value, a ₹1 lakh FD could support a credit limit of up to ₹80,000. The actual percentage varies by issuer.

You use the card like a regular credit card, and repayment is done according to the billing cycle. The FD continues to serve as security for the credit facility while earning interest.

How to Apply for an FD-Based Credit Card

The application process generally involves the following steps:

1. Choose the card: Compare the credit limit, fees, repayment terms, and other features.
2. Create or link an FD: The required deposit amount depends on the card and issuer.
3. Complete the application: Provide the required personal and KYC details.
4. Complete verification: The issuer verifies the application and FD.
5. Receive the card: Once approved, the credit card is issued with the applicable credit limit.

Before applying, check whether the FD has a minimum deposit requirement and understand how the deposit will be linked to the card.

What Are the Benefits for First-Time Applicants?

A secured credit card can provide several benefits when you are starting your credit journey.

• Access to credit: You get a credit facility without relying on an established credit history.
• FD continues earning interest: The deposit remains invested according to its applicable terms.
• Opportunity to build credit history: Responsible use and timely repayment can help establish a formal credit history when the issuer reports relevant information to credit bureaus.
• Regular credit card functionality: You can use the card for eligible purchases and repay the amount through the regular billing cycle.

What Should You Check Before Applying?

Choosing an FD-based credit card involves more than checking the required deposit amount. Compare the following before applying:

• Minimum FD amount required.
• Credit limit offered against the FD.
• Joining and annual fees.
• Interest and other charges on unpaid balances.
• Payment due dates and minimum payment requirements.
• FD premature-closure and lien-related terms.
• Rewards, cashback, or other card benefits.
• Whether the issuer reports repayment activity to credit bureaus.

These details determine the card's overall cost and usefulness for your financial needs.

Conclusion

An FD-backed credit card gives first-time applicants a way to access credit by using a fixed deposit as security. The FD remains invested according to its applicable terms, while the card provides a separate credit facility.

Before applying, compare the deposit requirement, credit limit, fees, repayment terms, and reporting practices. Choosing a card that fits your financial capacity and using it responsibly can make it a useful starting point for building your credit history.

FAQs

1. Does an FD-backed credit card require a CIBIL score?

Some secured cards do not require a prior CIBIL score because the FD secures the credit facility. Eligibility requirements differ between issuers.

2. Can I use an FD-backed credit card for online purchases?

Yes. Once issued, the card can be used for eligible online and offline transactions according to the card's terms.

3. Does the fixed deposit stop earning interest after it is linked to the card?

No. The FD continues to earn interest according to its applicable terms while it remains active and linked to the card.

Disclaimer: The information provided on the Website does not constitute investment advice, financial advice, trading advice, or any other form of advice, and you should not interpret any of the financial content as such. Please conduct your own due diligence and consult with a financial advisor before making any investment decisions. Midday does not endorse or promote any such activities, and you access them at your own risk, fully understanding the monetary and legal consequences involved. Midday shall not be held responsible for any losses you may incur as a result of using any such apps or websites.