What is Credit Card against Fixed Deposit?

What is Credit Card against Fixed Deposit?

03 January, 2024

Having a Credit Card in your pocket is like having an ace up your sleeves. Whenever you find yourself in a financial crunch, your Credit Card can come to your rescue. Besides being your ally in fulfilling your various needs, Credit Cards help you build your credit history, which improves your chances of procuring loans when you need them. To obtain a Credit Card you must fulfil the card issuer’s eligibility criteria. But if you don’t fit the eligibility requirements, you can get a Credit Card against your Fixed Deposits (FD). Read on to learn all about Credit Card against FD in this article.

Credit Card against FD – An Overview

Not everyone might be eligible for traditional Credit Cards, especially someone without a strong credit history or low credit scores. To address this issue, banks and financial institutions in India have introduced Credit Cards against FD. This option allows you to avail of Credit Cards by pledging your FDs as collateral. This type of Credit Card is also referred to as a Secured Credit Card and is governed by different eligibility criteria and usage parameters as compared to traditional Credit Cards.

How a Credit Card on FD Works

A Credit Card on FD is a unique offering from banks and financial institutions in India. It enables you to obtain a Credit Card by depositing a certain amount of money into a Fixed Deposit account. The amount you deposit acts as collateral for the Credit Card, reducing the Credit Card issuer’s risk for providing you a Credit Card despite your low credit score or inexistent credit history. These cards function like regular Credit Cards, providing you with a predefined credit limit that you can used for various transactions and purchases.

Eligibility Criteria

Following are the criteria you need to fulfil to obtain a Credit Card on FD:

  • Citizenship and Residence

    The apply for a Credit Card on Fixed Deposit you should be a resident Indian citizen or a Non-Resident Indian (NRI) with a valid residential address in India.

  • Age

    You need to fit into the age bracket specified by the card issuer, which is typically between 18 to 65 years. Different Credit Card companies may have variations in age limits, so you should check with your card issuer before applying.

  • Fixed Deposit Account

    You must also have an existing Fixed Deposit account or be willing to open one with the bank offering the Credit Card to apply for a FD-based Credit Card. The Fixed Deposit amount will serve as collateral against the Credit Card.

  • Minimum FD Amount

    The minimum Fixed Deposit amount required to avail a Fixed Deposit Credit Card varies from one bank to another. Typically, the minimum deposit amount can range from ₹10,000 to ₹25,000 or higher for Credit Cards with higher credit limits. However, this amount can differ depending on the bank’s policies and the Credit Card’s features.

Credit Limit on Fixed Deposit Credit Cards

In the case of traditional Credit Cards, the card issuer sets the credit limit based on your monthly income and credit repayment behaviour. However, for FD Credit Cards, the card issuing bank sets the credit limit after assessing the FD amount held as collateral. Most banks provide a maximum monthly credit limit of 75% to 85% of the FD amount. So, if you pledge an FD of a higher amount, you stand to get a higher credit limit at your disposal.

Applying For Credit Cards against Fixed Deposit

The process of availing Credit Cards against Fixed Deposit is relatively straightforward and involves the following steps.

  1. Create A Fixed Deposit

    If you do not have an existing Fixed Deposit with the bank, you need to first open an FD account. You can open the FD online or by visiting the bank. Ensure you consider the credit limit you want and create an FD accordingly.

  2. Fill Out Your Credit Card Application

    After creating the FD, you can approach the bank and express your interest in obtaining a Credit Card against FD. The bank will provide an application form that you must fill out, wherein you must provide your necessary personal and Fixed Deposit details.

  3. Submit The Required Documents

    You will need to provide your identity and address proof documents (for KYC purposes), along with the Fixed Deposit certificate to complete the documentation process for Credit Card against FD.

  4. Approval and Issuance

    Once you submit your documents, the bank verifies them. After evaluating your application, the bank approve your request for a Credit Card and issues it. The bank sends the CC and other vital literature pertaining to the card usage, policies, etc., to your registered address.

FD Interest Rates, Earnings and Non-Payment of Credit Card Dues

An excellent aspect of the Credit Card Against Fixed Deposits is that your FD continues to earn interest even while it is pledged as collateral with the card-issuing bank, throughout the Credit Card tenure. The FD interest rate varies based on the bank’s prevailing rates and the chosen FD tenure.

In case you fail to repay your Credit Card dues, the issuer deducts the amounts owed from the FD amount pledged as collateral. The card issuer also deducts the amount owed as interest in case you do not repay your outstanding Credit Card dues in full, on time.

Benefits Of FD Credit Card

Following are the benefits of getting a Credit Card against Fixed Deposits:

  • Easy Approval

    FD-based Credit Cards are an excellent option for individuals with limited or no credit history, making it easy for them to get approval.

  • Building Credit Score

    Timely repayment of Credit Card bills helps build a positive credit history and improves your credit score over time.

  • Fixed Deposit Continuity

    Your FD continues to serve as an investment generating returns. Interest payments on FDs are not stopped while the FD is pledged as collateral with the Credit Card issuing bank.

  • Lower Fees

    Credit Card issuers usually levy lower joining fees and annual fees on FD-based Credit Cards as compared to regular Credit Cards.

Need a Credit Card Against FD? Think HDFC Bank

HDFC Bank’s Credit Card against FD is an excellent product that enables you to continue earning interest on your FD while you also enjoy the benefits of a Credit Card. We do not ask for your income or employment information when you apply for this Credit Card. With our FD-based Credit Cards, you can start building your credit history and open the doors of eligibility for credit-based products like loans in future.

Visit HDFC Bank to apply for a Credit Card against FD today.

​​​​​​​*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals is subject to documentation and verification as per Bank’s requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.

Visit HDFC Bank to apply for a Credit Card against FD today.

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