CREDIT CARD AGAINST FD
The primary business of banks is to accept deposits and use them for lending purposes. Money can be lent to account holders/loan applicants through various products and schemes offered by banks. One of the creative and innovative methods with which the banks have come up is Credit Cards against FDs. Here, FDs are used as collateral securities thus making credit cards secured. The significant difference is that an unsecured regular credit card requires a borrower to have a good credit score, monthly income, and other eligibility conditions but in the case of Credit Cards against FDs, one simply needs a fixed deposit with the issuing bank.
HOW DOES A SECURED CREDIT CARD WORK?
When investors initiate an FD with the bank and then apply for a credit card against the same, they won’t need to submit any other income proof or collateral to avail the credit card. The FD serves as the collateral and security against the credit card. In case of default on the payment of a credit card, the issuer or bank reserves all the rights to break the FD. Nevertheless, before taking such a step, the issuer will intimate you through all the possible channels of communication. On the other side, a secured credit card in good standing for a stipulated amount of time for instance 1-2 yrs, would prompt the issuer to delink your Fixed Deposit.
The eligibility criteria may differ from bank to bank depending on the purpose. Some of the primary parameters are as follows:
- The minimum period for an FD account must not be less than 6 months.
- Applicants must have an FD account with the respective bank.
- Applicants must be a minimum of 18 yrs of age.
- The minimum value of a Fixed Deposit to apply for a credit card is Rs. 10,000.
- This can only be availed by Indian residents and not available to NRIs or foreign nationals.
WHY SHOULD YOU GET A CREDIT CARD AGAINST FD?
A secured credit card is a great alternative for people who are not having a good credit score and facing difficulty getting a credit card. So if banks deny issuing a regular credit card, you can go forward for a secured card and get it conveniently.
These cards are also ideal for beginners who want to make sure their Credit score is well maintained. If you are a housewife or do not have a fixed income or income proof, you can still avail of a secured credit card against your FD. Apart from offering identical benefits as the regular credit card, these cards have a slightly lower interest rate.
FEATURES AND BENEFITS OF CREDIT CARD AGAINST FD
A credit card against FD will offer you various multiple rewards like reward points, cashback, and more to its customers.
2. Interest on FD:
Cardholders can continue to earn returns on their FD while enjoying the facility of a secured credit card against FDs.
3. Minimal Paperwork:
Applying for a secured credit card does not require and involves much paperwork and documentation as the same would have been done at the time of opening the FD.
4. Credit Limit:
Generally, banks offer up to 85-90% percent of the FD amount as the total credit limit on the credit card.
5. Helps to build credit history:
To avail credit card, there is a requirement to have a credit history which must be good enough to avail of the facility. Having a secured credit card will assist to build a good credit history.
LIST OF BANKS OFFERING CREDIT CARDS AGAINST FD
- ICICI Bank
- Axis Bank
- Kotak Mahindra Bank
- State Bank of India
- Bank of Baroda
- Central Bank of India
HOW TO APPLY FOR A CREDIT CARD AGAINST FD?
- In the case of an existing FD, the applicant can visit the nearest branch of the bank to apply for the credit card or head to the official website for the same.
- In the case of no FD account with the bank, the applicant will need to visit the nearest bank branch to initiate an FD account. Few banks issue complimentary cards when you initiate an FD and if not, an application form can be filled up for the same.
Frequently Asked Questions (FAQs)
1. Can the credit card against FD used to withdraw cash from ATMs?
Yes, most banks allow withdrawing cash up to 100 percent of your credit limit using a credit card from an ATM. However, it varies across issuing banks.
2. Can foreigners get a credit card against FD?
No, foreigners can’t enjoy this facility.
3. What are the demerits of a Credit Card against FD?
Depending on the bank, the applicant requires a minimum deposit amount for a secured credit card. This money gets locked for the entire tenure and if there is a failure in the payment, this can hurt the credit score as well as the FD amount.
4. What is pledge FD?
Pledge FD means a deposit given to the bank by the applicant as a means of financial collateral for a loan. If the applicant fails to make the payment as per the rules and terms, the bank has the right and authority to take charge of the pledged security.