Introduction
FD credit cards, or fixed deposit credit cards, offer a unique solution by allowing users to secure a credit card against a fixed deposit account. This blog post will provide an overview of FD credit cards, including their definition, functioning, benefits, and eligibility criteria.
Understanding FD Credit Cards: What are they?
An FD credit card is a type of secured credit card that requires the applicant to deposit a certain amount in a fixed deposit account with a bank. This deposit acts as collateral for the credit card, reducing the risk for the issuer and making it easier for individuals with limited or no credit history to obtain a card. The credit limit on these cards is typically set at a percentage of the fixed deposit amount, allowing users to make purchases while still earning interest on their deposits.
How Do FD Credit Cards Work?
FD credit cards function similarly to traditional credit cards but with some key differences:
Collateral Requirement: To obtain an FD credit card, you must first open a fixed deposit account with the bank. The amount deposited serves as security against the credit limit extended by the bank.
Credit Limit: The credit limit is usually set at 75% to 90% of the fixed deposit amount. For example, if you have deposited ₹50,000, your credit limit could range from ₹37,500 to ₹45,000.
Repayment: Users can utilise their FD credit cards for various transactions and must repay the borrowed amount like any other credit card. If payments are not made on time, the bank can deduct the owed amount directly from the fixed deposit.
Benefits of Using an FD Credit Card
Easy Approval: Statistical data shows that FD credit cards are accessible for individuals with limited credit history, like students and new professionals, as they often do not necessitate extensive documentation or income verification.
Credit Score Improvement: Timely repayment of your FD credit card bills can help build or improve your credit score over time, paving the way for better financial opportunities in the future.
Continued Interest Earnings: The fixed deposit linked to your card continues to earn interest even while it serves as collateral, providing you with dual benefits.
No Annual Fees: Many banks waive annual fees for FD credit cards, making them a cost-effective choice. For example, compared to traditional credit cards with annual fees, FD credit cards can save you up to ₹5000 per year.
Eligibility Criteria for FD Credit Cards
To apply for an FD credit card, you typically need to meet certain criteria:
Age Requirement: Applicants must usually be between 18 and 65 years old.
Fixed Deposit Account: You must have an existing fixed deposit or be willing to open one with the issuing bank.
Minimum Deposit Amount: Different banks have varying minimum deposit requirements, generally ranging from ₹10,000 to ₹25,000 or more.
Conclusion
FD credit cards offer a secure way for individuals to access credit while safeguarding their financial credibility through the collateral of fixed deposits. By leveraging fixed deposits as collateral, these cards offer numerous benefits such as easy approval and potential improvements in your credit score. Ready to break free from financial barriers? Consider the seamless solution of an FD credit card to manage your expenses effectively.
FAQs
1. What is an FD credit card?
An FD credit card is a secured credit card that requires you to maintain a fixed deposit account with a bank as collateral against your credit limit.
2. How does the credit limit work for FD Credit Cards?
The credit limit is typically set at 75% to 90% of your fixed deposit amount. For instance, if you have deposited ₹50,000 in an FD, your potential credit limit may range from ₹37,500 to ₹45,000.
3. Can I still earn interest on my fixed deposit while using an FD credit card?
Yes, your fixed deposit continues to earn interest even while it serves as collateral for your FD credit card.
4. Are there any annual fees associated with FD Credit Cards?
Many banks offer FD credit cards without annual fees; however, it’s advisable to check with individual banks for specific terms and conditions.
5. Who can benefit from an FD Credit Card?
FD credit cards are particularly advantageous for students and new professionals aiming to establish their financial credibility by offering a secure credit option despite their limited credit history.
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