An FD credit card can be an ideal solution for individuals looking to establish or rebuild their credit history or those seeking a secure way to access a credit card. This financial tool, backed by a fixed deposit (FD), offers numerous benefits. This comprehensive guide will explore what an FD credit card is, how it works, and the steps to obtain one. Additionally, it will discuss how this unique option can help you increase the limit of your credit card.
Understanding FD Credit Cards
An FD credit card is a credit card secured by a fixed deposit held with the issuing bank. The FD serves as collateral, reducing the risk for the bank and making it easier for individuals to access credit, even with limited or no credit history. Here’s how it works:
- FD Deposit Requirement: To acquire an FD credit card, you must open an FD account with the bank. The amount you deposit in the FD typically determines your credit limit on the card. This amount remains locked in the FD account for the card’s tenure.
- Credit Limit Matching FD Amount: The credit limit on your FD credit card is usually set at a percentage of the FD amount, often ranging from 75% to 90% of the deposit. This ensures you have a credit line equal to or slightly lower than your FD, reducing the bank’s risk.
- Usage and Repayment: You can use the FD credit card just like a regular credit card for purchases, bill payments, and cash withdrawals. However, making timely payments is essential to maintain a good credit history. The bank may automatically deduct the monthly card payments from the linked FD account if you miss a payment.
- Interest on FD: While the FD remains locked, it continues to earn interest, providing you with the dual benefit of building your credit history while earning a return on your deposit.
Steps to Obtain an FD Credit Card
- Select a Bank: Research and choose a bank that offers FD credit cards. Leading banks like Kotak Mahindra Bank provide this option.
- Open an FD Account: Visit your chosen bank’s branch or use their online platform to open an FD account. Your credit card limit will be determined based on the FD amount.
- Apply for the FD Credit Card: Submit an application for the FD credit card with the bank, either online or at a branch. Provide the necessary documents, such as identity proof, address proof, and FD details.
- Verification and Approval: The bank will review your application and may conduct a credit check. The approval process for FD credit cards is typically more straightforward than traditional unsecured cards.
- Receive and Activate the Card: Once approved, you will receive your FD credit card. Activate it as per the bank’s instructions, usually by calling a designated number.
- Responsible Usage: Use the FD credit card responsibly, making timely payments and staying within your credit limit. Responsible usage can lead to a positive credit history and pave the way for potential credit limit increases.
Conclusion
An FD credit card is a valuable financial tool that allows individuals to access credit while building or rebuilding their credit history. By pledging a fixed deposit as collateral, you reduce the bank’s risk, making it easier to obtain a credit card, even if you have limited or no credit history. This unique credit card option provides financial flexibility and a secure way to access credit. As you use the card responsibly, making timely payments and staying within your credit limit, you can enhance your creditworthiness and open doors to potential credit card limit increases. Whether new to credit or seeking a secure credit card option, an FD credit card can be the stepping stone to a brighter financial future.
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