What is a credit card against Fixed Deposit? How can you get one?

Individuals who do not have a fixed income source or are looking to build a credit score can opt for a credit card against fixed deposit (FD). Primarily, these are secured credit cards backed by your FD or herein your FD serves as the collateral and against it you get a secure credit line that can be used for various purposes just like a regular credit card.

Against the FD amount, banks usually provide a maximum credit limit ranging between 70-90%. For instance, if you keep an FD of ₹1,00,000 with a financial entity as collateral, you may be eligible for a credit limit between ₹70,000 - ₹90,000, based on the bank’s terms and conditions. Meanwhile, your underlying FD with the bank will continue to earn interest at a pre-decided rate.

Now, if you use this credit card wisely and make timely repayments, keep the credit utilisation ratio low and continue using the same card for a longer time, your credit behaviour will be reported to credit bureaus, helping you build or enhance your credit score.

If you default on due payments, interest etc. on the credit card, your bank has the right to recover the same using the credit card security deposit, which here is the FD.

Ideally, this FD backed credit card can be opted by individuals seeking a secure credit line:

1. Who are new to the credit system and are looking to build a credit score
2. Freelancers
3. Students
4. Senior citizens

Banks issue these cards with minimal documentation and paper work. Also, they do not ask you to furnish an income or employment proof.

SBI Card Unnati: This credit card can be obtained against a minimum FD amount of ₹25,000. Also there is no joining or annual fee for the first 4 years and then charges are at ₹499/year from the fifth year.

IDFC FIRST WOW Credit Card: This credit card can be secured with a minimum FD amount of ₹20,000. Further, this credit card provides a credit limit up to 100% of the FD value, together with 4X reward points and zero forex markup on international spending.

How to apply for a FD-backed credit card?

You can apply for the FD-based card via the bank’s digital banking or mobile-app channel like at Axis Bank, HDFC Bank etc.

In the next step, you need to verify your identity using the Aadhaar and PAN.

After identity verification, select the FD amount and credit card. Also you can specify the required credit limit.

Now, you need to furnish your personal information such as residential address, e-mail ID and make the payment for the FD.

In the last step, you can complete the transaction via a KYC video call with the bank’s authorised agent.