A FD-backed credit card is a credit card where your credit limit is secured by a fixed deposit (FD) you hold with the issuing bank. It’s a smart way to access credit safely, especially if you have limited credit history or want to manage spending with minimal risk.
How an FD-Backed Credit Card Works
Deposit Money in a Fixed Deposit: You park a sum in an FD with the bank.
Get a Credit Limit: The bank gives you a credit card with a limit usually up to 90–100% of your FD.
Use the Credit Card: You can spend like a regular credit card.
Interest & Fees: Since your card is secured by your FD, interest rates and fees are often lower than unsecured cards.
Example:
FD Amount: ₹1,00,000
Credit Limit: ₹90,000 (90% of FD)
FD continues to earn interest while your credit card is active.
Benefits of an FD-Backed Credit Card
Easier Approval
Even with a thin or no credit history, you can get a credit card since the FD acts as security.
Lower Interest Rates
Banks view FD-backed cards as low-risk, so interest rates on unpaid balances are lower than regular unsecured cards.
Credit Building
Using the card responsibly helps you build or improve your credit score.
No Risk of Default for Bank
The bank is secured by your FD, so risk of default is minimal, reducing the chance of high penalties.
Continued FD Interest
Your fixed deposit continues to earn interest even while the card is active.
High Credit Limit Relative to FD
You get a significant credit limit proportional to your FD, making it ideal for larger purchases.
Who Should Consider an FD-Backed Credit Card?
New to Credit: First-time credit users without a history.
Low-Risk Borrowers: Those seeking controlled spending.
FD Holders: People who already have fixed deposits and want to leverage them for credit.
Students & Young Professionals: Building credit history safely.
Conclusion
An FD-backed credit card is a low-risk, high-benefit tool for accessing credit while keeping financial safety intact. It helps build credit history, offers lower interest rates, and leverages your existing fixed deposits effectively.
FAQs
Q1. What is the maximum credit limit on an FD-backed credit card?
Typically up to 90–100% of your fixed deposit amount.
Q2. Does the FD continue to earn interest?
Yes, your fixed deposit continues to earn interest even while linked to the credit card.
Q3. Is this card useful for people with no credit history?
Absolutely, it’s ideal for building or improving credit history safely.
Q4. What happens if I don’t repay the card dues?
The bank can recover the outstanding amount from your fixed deposit.
Q5. Are annual fees applicable?
Yes, but they are usually lower than unsecured credit cards due to the reduced risk for the bank.
Published on : 25th September
Published by : SMITA
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