What Is a Credit Card Against Fixed Deposit?

Posted on Monday, April 22nd, 2024 | By IndusInd Bank

We all long for the convenience of a credit card, but what if someone doesn’t match the eligibility criteria? Well, you can apply for a credit card against FD. You can think of it as a credit card that’s backed up by money you’ve already put aside in an FD. In this guide, we will take you through various aspects of availing a credit card on FD.

How Does a Fixed Deposit Credit Card Work?

In India, many banks now offer FD-based credit cards. This option allows you to avail of a credit card by pledging your FDs as collateral, providing a viable alternative known as a secured credit card. Unlike traditional credit cards, distinct eligibility criteria and usage parameters govern these secured cards.

To get the best credit card against FD, you need to deposit a specified amount of money into a Fixed Deposit account with a preferred bank. The deposited amount will then serve as collateral, mitigating the risk for the credit card issuer despite your potentially low credit score or limited credit history.

These cards function similarly to commonly used credit cards and provide you with a predetermined credit limit that you can utilise for various transactions/purchases.

Eligibility Criteria to Get an FD-Based Credit Card

To obtain a credit card against FD online, you need to fulfil the following eligibility criteria:

• You should be a resident Indian citizen with a valid residential address in India.
• You must fall within the age bracket specified by the card issuer, typically ranging from 18 to 65 years. However, different credit card companies may have variations in age limits, which is why you should check with your card issuer beforehand.
• To apply for this credit card, you must have an existing Fixed Deposit account with the bank offering the card or be willing to open one.
• The minimum FD amount required to avail of these cards varies across banks but typically ranges from ₹75,000 to ₹1,00,000 or higher.

Benefits of Getting a Credit Card Against Fixed Deposit  

Getting a credit card against a fixed deposit (FD) can be a smart move—especially for those who are new to credit or have a limited credit history. Since the card is backed by your FD, banks are more flexible with eligibility. Here’s why many people consider it a win-win: 

1. Easier Approval: Since the FD acts as collateral, approval is more accessible even if you don’t have a high credit score or a steady income source. 

2. Builds Credit History: Using the card responsibly helps you build or improve your credit score over time. 

3. Credit Limit Linked to FD: You can get a credit limit of up to 90% of your FD amount, giving you access to funds without breaking the deposit. 

4. Continued Interest Earnings: Your FD continues to earn interest, even while it’s pledged for the credit card. 

5. Lower Risk of Rejection: With reduced risk for the bank, there’s a higher chance of your credit card application being approved. 

This option is particularly helpful for students, homemakers, and self-employed individuals who might find regular credit card approvals challenging. 

Factors to Consider Before Applying for an FD-Based Credit Card 

While an FD-backed credit card has its advantages, it’s important to understand the terms clearly before signing up. Here are a few things to keep in mind: 

1. Minimum FD Amount: Most banks require a minimum FD—typically starting from ₹10,000 or more—to be eligible. 

2. Credit Limit Restrictions: Your spending limit is usually capped at a percentage of your FD value, so it may not match a regular unsecured card. 

3. Locked-in Funds: The pledged FD can’t be broken until you close the card or pay off the dues. This could limit your liquidity. 

4. Default Consequences: If you default on payments, the bank may recover the amount by breaking your FD, potentially leading to a loss of interest. 

5. Fees and Charges: Just like regular cards, there could be annual fees, late payment charges, and GST. Be sure to read the fine print. 

Evaluating these factors can help you decide whether an FD-based credit card suits your financial goals and spending habits.

What Will Be the Credit Limit of FD-Based Credit Cards?

In general, your monthly income and credit repayment behaviour determine the credit limit. However, for a credit card on FD, the limit is set by the issuing bank, considering the amount held in the FD account serving as collateral.

Typically, banks offer a maximum monthly credit limit ranging from 70% to 90% of the FD amount pledged. For example, if you pledge an FD of ₹100,000, you may be eligible for a credit limit of ₹70,000 to ₹90,000, depending on the bank’s policies. Similarly, if you pledge a larger FD, say ₹200,000, you could potentially receive a credit limit of ₹140,000 to ₹180,000.

This also means you can expect a correspondingly higher credit limit on your FD-based credit card if you deposit a higher amount in your FD.

Recommended Read: How Do You Choose the Right IndusInd Credit Card?

How to Apply for a Fixed Deposit Credit Card Online?

The process of obtaining a credit card against a fixed deposit involves the following steps:

1. Initiate a Fixed Deposit

If you don’t already have an FD with the bank, you’ll need to open one either online or by visiting a branch. Ensure that the amount you deposit aligns with the credit limit you desire for your credit card.

2. Complete the Credit Card Application

Once you have created the FD account, apply for credit card online against the FD. The bank will provide an application form in which you need to fill in your details.

3. Provide Necessary Documents

Submit documents for identity verification and address proof, along with your FD account details for Know Your Customer (KYC) compliance.

4. Approval and Card Issuance

The bank will verify the submitted documents and issue a credit card against FD upon approval.

Want to apply for a credit card online against FD without any physical documentation? Apply one with IndusInd Bank today.

Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.