FD Credit Card vs Regular Credit Card: Which is Better?

A credit card is one of the most widely used financial products offered by banks. It offers convenience, rewards, and access to a short-term credit card for purchases and payments. However, not everyone qualifies for a regular credit card because banks evaluate factors such as income, employment status, and credit score before approving an application.

For individuals with no credit history or a low CIBIL score, an FD credit card can be an excellent alternative. Issued against a fixed deposit, an FD credit card allows users to enjoy credit card benefits while building their credit profile.

This article discusses the FD credit cards and regular credit cards, their differences, and the pros and cons. Understanding these aspects can help you choose the right option based on your financial needs and eligibility.

What is an FD Credit Card?

An FD credit card is a credit card issued against a fixed deposit maintained with a bank or financial institution. Since the fixed deposit acts as collateral, the issuer faces lower risk and can approve the card without requiring a high income or strong credit history.

A credit card against an FD is particularly useful for first-time borrowers, students, self-employed individuals, and those looking to build or improve their CIBIL score.

The credit limit on an FD credit card is usually linked to the value of the fixed deposit and typically ranges from 75% to 90% of the deposit amount.

Also Read: How to Check CIBIL Score for Free

What is a Regular Credit Card?

A regular credit card is an unsecured credit card issued based on the applicant’s income, repayment capacity, employment status, and credit score. Unlike an FD credit card, it does not require any collateral or security deposit.

Banks evaluate an applicant’s financial profile before approving the card. Individuals with a stable income and a good CIBIL score generally have a higher likelihood of approval.

Regular credit cards often come with higher credit limits, premium rewards, cashback benefits, travel privileges, and exclusive offers.

Difference Between an FD Credit Card and a Regular Credit Card

The primary difference between an FD credit card and a regular credit card lies in the approval process and collateral requirements.

An FD credit card is backed by a fixed deposit, making it a secured card. This means the bank can use the deposit as security if the cardholder fails to repay dues. On the other hand, a regular credit card is unsecured and relies entirely on the applicant’s creditworthiness.

FD credit cards are generally easier to obtain because they do not require a strong credit history or high income. Regular credit cards, on the other hand, require a satisfactory credit score, stable employment, and sufficient income.

While FD credit cards help build a CIBIL score and establish a credit history, regular credit cards provide higher credit limits and more extensive reward programs.

FD Credit Card vs Regular Credit Card

Here is the comparison between an FD credit card and a regular credit card in a tabular format:

Pros and Cons of FD Credit Card

An FD credit card comes with various pros and cons, which a customer must know.

Pros of FD Credit Card

Here are the benefits of the FD credit card:

• Easy Approval:

The FD credit card is suitable for individuals with low income, no credit history, or a poor CIBIL score seeking credit access.

• Credit Building:

Regular repayments help establish a positive credit history and improve the credit score over time when the card is used responsibly.

• Lower Risk:

The fixed deposit acts as security, reducing lender risk and increasing chances of approval significantly.

• Financial Discipline:

It encourages responsible spending habits because the credit limit is linked directly to the deposited fixed deposit amount.

• Accessible for Beginners:

First-time borrowers can start building a credit history without requiring extensive financial documentation or income proof.

Cons of FD Credit Card

Here are the limitations of the FD credit card:

• Fixed Deposit Requirement:

Applicants must maintain a fixed deposit, which locks in their funds for as long as it serves as collateral for the credit card.

• Lower Credit Limit:

Credit limit depends on fixed deposit amount and may restrict larger purchases or higher spending needs.

• Limited Premium Benefits:

Many FD credit cards offer fewer rewards and privileges compared to premium regular credit cards.

• Funds Remain Blocked:

The deposited amount cannot be accessed freely while it serves as security for the credit card.

• Reduced Flexibility:

Opportunities for credit expansion may be limited unless the fixed deposit amount is increased substantially.

Pros and Cons of a Regular Credit Card

A regular credit card comes with various pros and cons, which a customer must know.

Pros of a Regular Credit Card

Here are the benefits of a regular credit card:

• Higher Credit Limits:

The eligible customers can receive significantly higher limits based on their income and repayment capacity.

• Better Rewards:

It offers attractive cashback, travel benefits, reward points, and exclusive discounts across various spending categories.

• No Collateral Needed:

Users do not need to maintain fixed deposits or pledge any assets to obtain credit card access.

• Premium Features:

Many regular cards provide airport lounge access, concierge services, insurance benefits, and lifestyle privileges.

• Improves Credit Profile:

A responsible repayment behaviour helps strengthen the credit score and enhances long-term borrowing eligibility.

Cons of Regular Credit Card

Here are the limitations of a regular credit card:

• Strict Eligibility:

The approval depends on income stability, employment status, and an acceptable credit score requirement.

• Risk of Rejection:

Individuals with poor credit history may face higher chances of application rejection.

• Higher Fees:

Some regular cards charge annual fees, joining fees, and penalties for missed payments.

• Debt Accumulation Risk:

Excessive spending without repayment discipline can lead to debt and financial stress.

• Interest Charges:

Unpaid balances attract high interest rates, increasing overall borrowing costs.

FD Credit Cards are Good For Whom?

FD credit cards are suitable for several categories of individuals:

• First-Time Credit Users:

Individuals without any previous credit history can begin establishing a positive financial track record.

• Students and Young Professionals:

New earners can access credit facilities while learning responsible financial management practices.

• People with Low Cibil Score:

Individuals looking to improve their Cibil score can benefit from consistent repayment behaviour.

• Self-Employed Individuals:

Those with irregular income may find approval easier through a credit card against an FD.

• Rejected Applicants:

People facing rejection for regular credit cards can gain access through secured card options.

Credit Limit on the FD Credit Card

The credit limit on an FD credit card is determined as a percentage of the fixed deposit amount. Most banks provide a limit ranging between 75% and 90% of the fixed deposit value.

For example, if you open a fixed deposit of ₹1 lakh, the credit limit may range from ₹75,000 to ₹90,000, depending on the issuer’s policy.

The exact limit varies across banks and financial institutions. Increasing the fixed deposit amount may also increase the available credit limit.

Also Read: How to use your credit card limit smartly?

Does an FD Credit Card Help To Build a CIBIL Score?

Yes, FD credit cards can help build a CIBIL score when used responsibly.

Banks report payment activity and credit utilisation data for FD credit cards to credit bureaus, just as they do for regular credit cards. Timely bill payments and responsible credit usage can positively contribute to your credit score.

Also Read: How to Increase your CIBIL Score?

FD Credit Card vs Regular Credit Card: Which is Better?

The answer depends on your financial profile and objectives.

If you have a stable income, a good credit score, and qualify for an unsecured credit, a regular credit card may be the better choice because it offers higher credit limits and more attractive rewards.

However, if you are new to credit, have a low CIBIL score, or find it difficult to qualify for a traditional card, an FD credit card can be an excellent alternative. It provides access to credit while helping you build a strong repayment history and improve your credit profile.

For many individuals, an FD credit card serves as an initial step toward obtaining a regular credit card in the future.