Financial institutions offer secured credit cards which are issued against fixed deposit accounts for individuals who cannot otherwise apply for a normal credit card. This can be due to many reasons ranging from low CIBIL score, being a student and therefore unemployed, etc. Even spendthrift individuals who do not prefer to have a line of credit can go for these types of credit cards.
Essentially credit card against FD assures an issuer that even if a customer is unable to pay their due amount, the sum can be retrieved from the fixed deposit’s investment. It also offers some of the usual benefits offered by credit cards like Bajaj Finserv RBL Bank SuperCard and others.
Basic advantages of secured credit cards
Credit cards offer multiple benefits apart from just quick money during emergency transactions. In case of secured credit cards, the usual features come with some minor changes along with a few other benefits. These advantages of credit cards issued against fixed deposit accounts are discussed underneath.
- Easy application: These cards do not require extensive documentation like bank account and employment details; instead, KYC and FD documents suffice. This minimal documentation also ensures easier approval and faster activation of the credit account.
- Credit line and interest rates: The credit limit on these cards is generally 75% to 80% of the FD account. Therefore, depending on the account itself the credit value can reach a substantial sum. Customers should look up simple tips to get the most out of their credit cards and its high credit limit. Additionally, the rates of interest are also very affordable since secured credit cards have lower risk factors.
- Flexible repayment: Often students who are not yet employed go for these types of credit cards. Financial institutions usually offer them the option to repay their credit card bill after they secure employment.
- CIBIL score building: There are numerous ways how a customer can use a credit card to improve their credit score. Especially since these credit cards are secured against FD, they can be used to improve the score to aid them in availing future financial products.
- Reward points and cash-back: These cards have reward points and cash-back options on them which allow customers to reduce their overall expenses even further.
Disadvantages and solutions
Along with the numerous advantages, these credit cards have a few minor shortcomings to offer. Fortunately, these inconveniences can be solved easily with a little knowledge on the customers’ part.
- Since defaulting on payments can lead to their FD accounts being used to clear the debt, credit card against FD can essentially jeopardise their future financial setup.
To eliminate that risk, an individual requires to be regular with his or her repayments. It will introduce good borrowing habits as well.
- Being linked to FD account, the credit limit can seem low especially during unforeseen situations. Customers should consider linking high value FD accounts to avail high credit line facilities.
A customer can proceed with the application process once they know which financial tool they intend to go for. The application process itself is simple.
Along with multiple advantages of credit cards, financial institutions also provide a streamlined application method. Institutions like Bajaj Finserv bring you pre-approved offers that make availing credit cards quick and easy. Pre-approved offers are available on numerous financial products like credit cards, home loans, personal loans, business loans, etc. You can check your pre-approved offer by sharing your name and phone number.
The advantages of credit cards against FD are comprehensive while its disadvantages can be handled with careful financial planning. Consequently, customers should also keep in mind to understand how to use a credit card wisely so that they can avail all the offered benefits. Effectively, using the benefits offered like reward points and cash-back along with the multiple discounts can lead to immense saving for users.