Opening a fixed deposit (FD) is one of the safest investment options for individuals looking for guaranteed returns. Did you know you can also use your FD to get a credit card? Credit cards against FDs allow you to enjoy the twin benefits of earning interest on your deposit while accessing a line of credit for your expenses.
Compared to regular credit cards, credit cards against fixed deposits offer the advantages of easy approval, lower interest rates, and the security of being backed by your FD. Let’s get to know more about the key features and rewards of credit cards against FD that users should know:
Key Features of Credit Cards Against FDs
Credit cards against FD credit cards share many standard features with regular credit cards but also have some unique attributes, as discussed below:
1. Collateral-Backed Card
The most significant advantage when you apply for credit cards (FD cards) is that your bank FD secures them. Your credit limit is determined as a percentage of your FD amount. Due to the lower risk posed by the collateral security, banks can offer better terms, including lower interest rates.
2. Builds Credit History
Using the card responsibly by paying your bills on time helps build your credit score. This can enable easier loan approval and better terms for future credit cards. Those with no prior credit history benefit the most.
2. Lower Minimum FD Requirement
You can get a credit card against FD, with most banks requiring you to open an FD account with a minimum deposit between ₹10,000 to ₹25,000. Some premium cards may need higher FD amounts.
3. No Income Documents Needed
Unlike regular cards, credit cards against FDs do not require submitting proof of income, tax documents, or salary slips. The FD itself acts as your security. This helps self-employed individuals and students quickly get access to credit.
4. FD Kept Intact
Your fixed deposit earns the applicable interest rate per the FD time period. As long as you service your credit card bills on time, your FD remains untouched by the bank, and you will receive the full maturity value.
5. Lower Interest Rates
These cards come with relatively lower interest charges than personal loans and other unsecured borrowing options. This makes them an affordable means to fund short-term needs.
6. Reward Points and Cashbacks
Like regular credit cards, cards against FDs allow you to earn attractive reward points and cashback on your spending. You can redeem these earnings as statement credits or shopping/travel vouchers.
Attractive Rewards and Benefits
Besides the core benefits, credit cards against FDs also offer attractive rewards and deals that enhance their appeal:
1. Cashback on Spends
These cards offer attractive cashback, on spending at departmental stores, grocery shops, dining, entertainment, fuel stations, etc. Cashback earned annually can offset your annual fee (if applicable).
2. Dining and Shopping Discounts
Banks partner with major dining brands, e-commerce portals, and physical store chains to offer cardholders exclusive discounts. This helps them save substantial money on routine spending.
3. Travel and Lifestyle Privileges
Higher-end variants offer complimentary domestic airport lounge visits, travel insurance covers, priority pass privileges, and discounts on hotel bookings, dining, and widespread recreational venues.
4. Manage Finances Smartly
While credit cards against FDs offer easier approvals and attractive rewards, ensure responsible usage by paying bills on time, staying within credit limits, and avoiding cash withdrawals. Use your card only for meeting short-term needs and not for unchecked spending binges.
Conclusion
When used judiciously, credit cards against fixed deposits provide the dual advantage of enjoying your FD returns while accessing credit for your spending needs. Compare different bank offerings to find the card most suited to your lifestyle and spending patterns.