There are a bunch of credit cards in the market — some of them are easy to get if you have a good credit score and a source of healthy income. But if you don't have a good credit score or an unestablished credit history, then you can opt for a secured credit card.
Most credit cards are unsecured financial products, meaning you don't have to pledge any asset as collateral, like the way you would do for a loan. But financial institutions offer secured credit cards against collateral assets — usually, a fixed deposit or cash.
Banks that offer these secured cards require you to have an FD of a certain amount to be eligible to apply for them. And its credit limit is usually capped at 85% of the FD’s value.
Secured credit cards function just like regular credit cards — the only difference is what happens when dues are left unpaid.
Banks are authorised to liquidate your fixed deposit to recover any unpaid debts or outstanding amounts that you may have on the secured credit card. So, it should be a priority not to miss repayments.
A secured credit card offers a host of different benefits to the cardholder:
Secured credit cards provide a viable option for individuals with limited or no credit history. By pledging a fixed deposit as collateral, you can establish a credit history and improve your credit score over time. The advantage of earning interest on the fixed deposit while using the card responsibly adds to its appeal. Additionally, maintaining a good relationship with the bank through a secured credit card lead to favourable loan options in the future.
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Yes. If you have a low credit score or no credit history, using a secured credit card can help build a credit history. If you make timely payments, your credit score will automatically improve.
Secured credit cards in India are issued against a fixed deposit. In case you default or delay the repayment, your bank is authorised to liquidate the FD held as collateral and use the funds to settle your unpaid/ outstanding debts.
While this largely depends on the bank, the minimum deposit is ₹20,000.
To get a secured credit card, you typically need to follow these steps:
A secured credit card can help improve your credit score by establishing a positive credit history. Making timely payments and maintaining a low credit utilization ratio with a secured credit card can demonstrate responsible credit behavior to credit agencies. However, the impact on your credit score will vary based on your overall credit profile and how well you manage the card.