Kolkata: As many as 10-11 lakh credit cards are issued in India every month. The number of credit card transactions is also rising — 48.6 crore in July this year against 38.4 crore in July of 2024 versus 27.8 crore in July 2023. It is quite easy to understand such a huge rise in usage cannot be unaccompanied by risks. This has led to some banks push for more secure lending via credit cards.
But credit card lending and security!? Aren’t these contradiction in terms? Banks have devised a type of credit card which are not issued merely on the basis of one’s income and creditworthiness. These are backed by assets — fixed deposits. “A Credit Card against Fixed Deposit allows you to secure a Credit Card by placing funds in a Fixed Deposit Account. The deposited amount acts as collateral for the Credit Card. This makes it a suitable option for individuals with no credit history or low credit scores,” says HDFC Bank, the market leader in credit cards in the country.
Features of FD-back credit cards
There are some clearly defined benefits of a credit card that is back up by a fixed deposit. These are:
Income proof not needed: The applicant gets a credit card against the Fixed Deposit and does 2not need to furnish proof of income, credit score, employment details etc.
Approval is easy: The bank too feels secure to lend when backed up by an asset. Approval becomes easy and anyone who has an FD can apply.
Building credit score: These FDs help an individual to build a robust credit score since timely repayment of due helps to create a strong credit history. The credit limit for an FD backed credit card is about 80-90% of the FD amount.
Quick access to funds: When in need, one does not need to break an FD but simply use the card for payment. If the dues are paid off within the stipulated period, no interest needs to be paid either.
Rewards, bonus points: All credit cards incentivise expenditure by providing reward points/cashback which can be used in different instances by the user profitably.
How to apply and which FDs are not eligible
It is easy to apply for such a card. If you have an FD, you can just fill up a form and get a card. Else, you have to create an FD and apply for a credit card against the deposit. The beauty is one can do it online. “If you opt to submit a physical FD backed Credit Card application, you will have to submit your identity and address proof documents (for KYC purposes). Additionally, you must submit the Fixed Deposit Certificate to complete the documentation process for a Credit Card against FD,” says HDFC Bank.
All Indian citizens with a residential address in the country can obtain one. Anyone between 18 and 75 years can get such a credit card. One should have a minimum FD amount of Rs 15,000 or if the tenure is less than one year. Moreover, Tax Saver FD (of five year duration), FD of NRIs and minors FDs that have been marked for lien or sweep-in are not eligible to be used for this purpose.