Things to know before applying for a credit card against FD | Fusion - WeRIndia

Credit cards are useful for digital payments without having money in your account. Besides, there is a specific duration to pay the bill.

However, banks do not give credit cards to every person that applies. If they think that you have inadequate income or your job or profile is risky, then they will reject your credit card application. In such cases, you can apply for a secured credit card which is given against fixed deposit.

Many leading banks like SBI normally offer credit cards against fixed deposits to avoid the risk of NPAs.  Generally, the credit limit will be up to 80 per cent of the fixed deposit amount.

There are certain advantages for secured credit cards against fixed deposits. Unlike regular credit cards, these secured credit cards do not have annual or renewal fee.

The card comes with lower interest rates than that of regular credit cards. No paperwork is essential to obtain the card as it will be provided against fixed deposits. Income proof is also not required. The credit limit depends on the amount deposited by the customers with the bank.

However, it has certain disadvantages also. The credit card will be valid till the maturity of the fixed deposit. After the maturity of the deposit, the credit cardholders cannot use their card. They have to renew the deposit and apply for a new credit card.

The fixed deposit made with the bank cannot be considered as a liquid asset as the credit card is issued against the deposit. The depositors cannot withdraw their amount before the maturity of the deposit even in an emergency. If the cardholder fails to pay the credit card bill on time, it will bring down the credit score drastically. In addition to that, banks have the right to take over the fixed deposit in such events.

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