The term ‘secured credit card’ has become quite popular these days. Many experts are recommending secured credit cards for those who wish to build a credit history. Well, what exactly are secured credit cards and how to use them to build the credit history? This article will help you get a better understanding of secured credit cards.
What are secured credit cards?
Secured credit cards, also called credit cards against fixed deposit, are offered against a security deposit with the bank and hence the name.
Unlike regular credit cards which can only be availed based on the applicant’s income and employment status, secured credit cards can be availed by simply having a fixed deposit account with the bank.
The remaining functionality of the secured cards remains similar to that of regular credit cards.
Why should I opt for a secured credit card?
This could be an obvious question if you’re eligible for a regular credit card. But secured credit cards are specially designed for those who are not eligible for the normal credit cards. Why is someone not eligible for a normal credit card? Well, there are more than a couple of reasons.
- For first-time applicants, who do not have any credit history either, it’s difficult to get a credit card.
- People earning less than the minimum income required to apply for a credit card also find it hard to get a credit card.
- Applicants with poor or no credit score are not eligible for a credit card.
- To apply for a credit card, one must have a stable monthly or annual income and the associated proofs.
- Multiple instances of rejecting a credit card application would disqualify them from having a credit card.
If you fall under any of the above criteria, opting for a secured credit card might be a smart alternative for you, in case you need a credit card.
How to apply for a secured credit card?
Once you have decided to apply for credit card against fixed deposit, try to find the secured credit cards offered by various banks. Compare the features, the minimum deposit amount required, maximum credit limit offered, and other benefits to find the best card.
Here are a few secured credit cards offered by top banks in India.
- Andhra Bank Visa Platinum Credit Card – Rs.20,000 (Min. FD amount)
- SBI Card Unnati Credit Card – Rs.25,000 (Min. FD amount)
- Axis Bank Insta Easy Credit Card – Rs.20,000 (Min. FD amount)
- YES Prosperity Rewards Plus Credit Card – Rs.50,000 (Min. FD amount)
- ICICI Bank Instant Platinum Credit Card – Rs.20,000 (Min. FD amount)
Once you have shortlisted the credit card, you can contact the bank to get the details about opening a fixed deposit. The amount you’re depositing in the account should not be less than the minimum threshold specified by the bank to avail the card.
Once the fixed deposit account is opened, you can apply for the secured credit card against the same. However, while applying for the FD account let the bank know your intention to avail a credit card against it for smoother process flow.
Key things about secured credit cards
- The credit limit offered on a secured credit card depends on the amount deposited in the FD account. Banks typically provide 75% to 85% of the fixed deposit amount as the total credit limit on your secured card.
- In case of defaults and delayed credit card bill payments, the card issuer reserves the right to break the FD.
- If you maintain the secured credit card in good standing for a decent amount of time, the bank might release your FD and convert the credit card into a standard one.
- Secured credit cards share similar features of a regular credit card in terms of reward points, interest-free period, revolving credit facility, etc.
Benefits of applying for a secured credit card
- No further documentation required.
- Flexibility to choose the credit limit as it depends on the fixed deposit amount.
- No income proof required – Ideal for students, homemakers and senior citizens.
- Helps you build credit history.
- Earn interest on the fixed deposit.
- Opens doors for new lines credit lines.
Thus, a secured credit card becomes a better alternative for those who are finding it hard to apply for a regular credit card. It not only helps you secure a credit card, but also enables you to build a credit history, that opens new credit opportunities.