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Pros and Cons of Credit Cards Against FD

A credit card against FD can help improve credit score. However, there are a few cons. Check out the pros and cons of secured credit card before applying.

Pros and Cons of Credit Cards Against FD

Pros and Cons of Credit Cards Against Fixed Deposit(FD)

Sid has a lengthy bucket list that includes the places he wants to visit. He was attracted to the discounts on flight tickets and train tickets available for credit card customers. However, after enquiry, he came to know that he needed a good credit score to apply for the particular credit card. He looked for ways to build a good score. Secured Credit Card or Credit Card against Fixed Deposit seemed like the easiest and affordable way to build credit history. Moreover, secured credit cards can help to make a high-ticket purchase and earn rewards.

In this article, we will look into the benefits and drawbacks of secured credit card.

What is a Secured Credit Card?

A secured credit card is like a regular credit card. However, to apply for a secured credit card, you need to book a Fixed Deposit (FD). The amount of money that you save in the fixed deposit determines the credit limit. Generally, the credit limit is 80% of the booked FD. 

Financial institutions have a fixed minimum FD amount that customers need to deposit to avail a secured credit card. The minimum amount starts from Rs.15,000.

You can avail Credit card against FD online at the time of booking the FD or by logging in to the net banking or mobile banking application. You will receive your credit card within a few days at your communication address.

Regular use of the card, timely payments and keeping the credit utilisation low can help to improve your credit score.  

However, if you cannot pay the dues on time, the bank will collect the dues from your linked fixed deposit.

pros and cons of credit card against FD
pros and cons of credit card against FD

Secured Credit Cards Pros

Secured credit cards come with different benefits, such as building an excellent credit history. Here are some advantages of using a secured credit card.

Build credit history

If you don’t have a credit history or have availed no credit product, secured credit cards can help to build credit history. It is because the payments made towards the card are submitted to the credit bureaus like CIBIL. A good extensive credit history makes it easier to apply and qualify for other credit products such as loans and unsecured credit card.  

Improve your credit score

Using your credit card wisely and paying your dues on time can improve your credit score. A timely payment of dues signals credit bureaus you are handling your credit responsibly. So, if you have a low credit score, getting a secured credit can help you increase your score.

Easy application

Credit card against Fixed Deposit is easy to apply. Eligible customers can apply secured credit card online through the mobile banking app or net banking portal. Few banks also provide the opportunity to apply for a credit card while booking an FD.    

Earn higher interest

While you use your credit card to pay for purchases, your fixed deposit linked with the card will continue to give interest higher than a savings account. The fixed deposit will be automatically renewed and you can use your credit card with no hassles. After you close your secured card, your deposit can be credited to your savings account.

Rewards on purchases

Secured credit card users can accumulate reward points and get offers on their credit card usage. So, shop around for the card that best suits your needs and preferences. This will help you make the most out of your purchases.

Higher approval

Customers applying for a secured credit card have a higher chance of getting their applications approved than unsecured card applicants. Banks consider it safe to offer a credit card on FD as collateral backs it. Young professionals, housewives, and students can also apply for these cards. 

No worrying about debt collection

The bank will collect the proceeds from your fixed deposit if you default on your card payments. Hence, in case of late payments, you don’t have to worry about getting harassed by debt collectors. However, late payments can hurt your credit score.

Not falling deep in the debt trap

Users of credit card against FD don’t have to worry about falling deep in the debt trap. It is because the FD amount determines the credit limit. The credit limit of the secured credit card is lower than regular cards. Moreover, in case of a default, the bank will break your FD as compensation. Keep your fixed deposit corpus low if you are worried about reckless spending.  

Ability to avail a regular unsecured card

Proper use of your card can make it easier to apply for an unsecured credit card with a high credit limit. Many banks offer regular credit cards to their customers after a few months. These cards come with higher offers and better perks.

Drawbacks of Secured Credit Card

While credit card against FD is an easy tool to build credit score, there are a few drawbacks of these cards.

Inability to come up with minimum FD

Customers need to book an FD to avail a secured credit card. Although the minimum amount to open an FD is low, coming up with the amount to book the fixed deposit may not be possible for many individuals. Try saving regularly every month to book the FD of the required amount.  

Low credit limit

Credit cards against FD have a low credit limit. Hence, you may not make large purchases with your credit card.

Fees and interest 

Secured credit cards have annual fees and joining fees. Moreover, late payment can also attract interest which may compound over time. To be on the safer side, check the fees and interest rate on the credit cards before applying.

Fewer benefits

Secured cards have fewer benefits in terms of offer, insurance on the purchases and reward points. Look into the fine print to understand the different benefits provided by the credit card company. Get your queries solved by the bank representative.


Secured credit cards are a great tool to build credit history with no hassles. Regular use of the card and paying bills on time can help in improving your credit score within a few months. It is a good option for students and young professionals looking to build credit history and become eligible for other credit cards. However, these cards have a few drawbacks. It is important to consider both the pros and cons of secured credit card before applying online.

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