How a Credit Card Against Fixed Deposit Works: A Complete Guide

Credit cards can be a great tool to support you in your daily purchases and be at your side when you’re facing a financial crunch. Issuers set eligibility criteria that you need to fulfil in order to get approval for this type of credit card. 

A good credit score is one of the most important criteria to prove your creditworthiness. If you are applying for a card for the first time, it’s likely you don’t have a credit history. In this case, a credit card on FD (Fixed Deposit) can be the ideal choice. 

Here, the FD is considered as the collateral, and your credit limit will depend on the amount you have in your FD account. When you use this card responsibly and pay bills on time, it will help you to build a good credit score, which will help you to qualify for better loans and credit cards in future.

What Is an FD Credit Card?

There are two types of credit cards – secured and unsecured. Both of them will let you buy things on credit, but how you get them varies.  

• Getting an unsecured credit card is based on your credit score, income, and other factors

• Getting a secured credit card is based on you starting an FD with the issuing bank, which works as a security

If it's your first time applying, it's likely that you may not have a credit score. Without a good score, it will be hard to be eligible for a regular credit card, as issuers normally require a credit score of 750 or more. In this case, you can apply for a credit card backed by a fixed deposit. Your credit limit is a percentage of your FD amount. 

How FD Credit Cards Work

When you get a credit card against a fixed deposit, you don’t need to show income proof or your credit score. Your FD acts as security, so if you don’t pay your bills, the bank can use your FD to recover the amount. However, they will inform you before taking such a step. 

If you use the card responsibly for 1-2 years, the bank may remove the FD requirement and upgrade you to a regular credit card. As you pay your bills on time, you can build a positive credit history and even apply for a regular credit card on your own. 

Benefits

Some of the advantages of getting a credit card on FD are: 

• You can get a credit card even if you have no prior credit record

• You can benefit from minimal paperwork and faster approval of your application 

• You will earn interest on your FD, and it will continuously grow while you enjoy the benefits of a credit card

• You will get cashback, discounts, and other perks based on the card you choose

Eligibility Criteria

Every bank has its specific eligibility criteria, but to get an FD-secured credit card, the following conditions have to be met:

• You should be over 18 years old

• You should have a fixed deposit with the bank

• You should have a PAN card and an Aadhaar card (if you are applying online, you need to have the documents in digital format)

Credit Limit

For regular credit cards, the limit depends on your income and repayment history. But for FD-backed cards, the credit limit is based on your FD amount. Banks usually offer 75% to 85% of your FD as the credit limit. A higher FD amount means a higher credit limit on your card.

As you start using your FD-backed card, remember to be smart. Here are some guidelines you may follow:

• Use only 30% of your credit limit to lower your credit utilisation and increase your credit score 

• Pay your credit card bills by the due date and in full to not incur any interest 

• Use credit card EMIs for big-ticket purchases

To get started with a rewarding FD-backed credit card, consider the One Credit Card + FD combo, which offers 5X reward points on your top two spending categories every month. This card is issued by RBI-approved banks like SBM Bank and the Federal Bank, and you can earn up to 7.5%* on your deposit. 

The best part is that you get a credit limit that is 100% of your FD amount, and you can choose to open one between ₹2,000 and ₹1 Lakh. What’s more, the OneCard App makes it easy for you to track your monthly expenses, see the latest offers from retailers and restaurants around you, and redeem points for instant discounts. Apply online today to get this lifetime-free credit card and pay zero annual or joining fees!