FD Credit Card-All You Need to Know About FD Backed Credit Card

If you’re new to credit cards or have struggled with a low credit score, getting approved for one can be challenging. Typically, people either go for a credit card linked to their salary account or opt for an add-on card under a family member. But if you’re after a card that’s truly yours with great benefits, an FD-backed credit card might be just what you need.

This guide covers everything about FD-backed credit cards, how they work, their benefits, and tips to manage them wisely.

• It works like a regular credit card but requires a Fixed Deposit (FD) as collateral.

• It earns interest on your FD while using the card for transactions.

• The FD amounts range from as low as Rs. 5,000 to Rs. 1,00,000.

• A minimum FD of Rs. 5,000 is required, though higher FDs may offer added benefits.

• An FD must be set up with the bank issuing your credit card. This deposit determines your credit limit, typically a percentage of the FD amount.

• Your FD earns interest at an attractive rate, often around 7.5%* annually, providing additional income.

• The credit limit on an FD-backed credit card is usually around 80-90% of the FD value, depending on the bank’s policy.

• You’ll receive cashback, rewards points, and other features like a regular credit card.

• Pay your credit card bills by the due date to maintain a good credit score.

• If not paying in full, at least pay the minimum due.

• Set up Auto Pay on your FD-backed card to avoid missed payments.

• Keep your credit usage below 30% of your limit.

Example: With a ₹50,000 limit, aim to spend no more than ₹15,000 per cycle.

• Spend within your means to prevent high-interest debt.

• Late or missed payments can lead to fees and damage your credit score.

• Builds Credit History: Ideal for beginners or those with a low score, FD-backed cards help build or repair credit as long as you use them responsibly.

• Easy Approval: Since your FD acts as security, approval chances are higher than unsecured credit cards.

• Earns Interest: Unlike a standard card, you still earn interest on your FD while using the credit card.

• Flexible Spending: As an extension of your existing funds, an FD-backed credit card offers a safe way to use credit without risking debt.

• FD Closure Charges: If you close your FD within 12 months, expect a 1% penalty on the interest earned. This penalty ensures that short-term users don’t disrupt the bank’s deposit timelines.

• Card Closure Charges: Closing the credit card itself within the first six months can incur fees.Always check terms before closing to avoid unexpected costs.

1. Regularly Update Income Information

A higher income could qualify you for a limit increase. Inform your bank of any significant income changes to potentially boost your card limit.

1. Use the Card Consistently and Responsibly

Making small, regular purchases and paying them off in full each month can encourage the bank to offer limit increases over time.

1. Keep Your Credit Utilisation Ratio Low

Demonstrating that you can responsibly use and repay the credit provided helps establish trust with lenders, making it easier to qualify for a higher limit later.

• New Credit Card Users: If you’re just starting with credit, an FD-backed card offers a safe introduction.

• Low Credit Score Applicants: FD-backed cards are also ideal if you’re looking to rebuild credit, as they require lower eligibility.

• Young Professionals and Students: For those who may not qualify for traditional credit cards, this secured option can be a great stepping stone.

In sum, an FD-backed credit card is an excellent way to build a solid credit history without the stress of unsecured debt. By leveraging your fixed deposit, you gain access to various credit card benefits, earn interest on your deposit, and gradually work towards a better credit score. Just remember to use it responsibly, make timely payments, and monitor your spending to avoid any debt traps.

Start by choosing a credit card company whose card you want to apply for. To get an FD-backed credit card, open a fixed deposit at your chosen bank, either online or in-branch. After that, apply for the credit card referencing your FD account. Provide identity and address proof if required. Many banks allow instant online applications with minimal paperwork for eligible FD holders. 

The minimum FD amount required for an FD-backed credit card typically ranges from ₹5,000 to ₹20,000, depending on the bank. Higher FD amounts result in higher credit limits linked to the deposit value. So, it's important to check with your bank before applying. 

Most banks do not require income proof for issuing FD-backed credit cards. The FD itself acts as collateral, providing security for the issuer. This makes FD cards accessible to students, homemakers, and self-employed individuals without regular income, and helps them build credit history.

FD-backed credit card charges include annual fees, joining fees, interest on outstanding balances, and late payment penalties. Some banks offer lifetime-free FD cards, but standard fees for replacement, cash withdrawal, and foreign transactions may apply.  

FD-backed credit cards are widely available at leading banks such as HDFC Bank, ICICI Bank, Axis Bank, SBI Bank, IDFC FIRST Bank, and Bank of Baroda. However, not all banks offer them. It is best to confirm availability and terms before proceeding.