Building your savings is great, especially through a safe and risk-free avenue like a fixed deposit. While your fixed deposit earns interest, it can also do more. That’s the idea behind a credit card against an FD.

When you’re in need of funds, you can use your FD as collateral for getting a credit limit. This waymore about this smart approach to credit in this detailed blog.

How does a credit card against an FD work?

A credit against an FD is a secured credit card where the credit limit is linked to your FD. It is typically a percentage of the total deposit. For example, IDFC FIRST Bank offers up to 100% of the deposit amount as the credit limit onMeanwhile, you continue earning interest on your FD. The credit card and your fixed deposit operate simultaneously, so your savings keep growing while you spend on credit. All you need is to maintain the specified deposit limit in your FD to qualify.

Key benefits of using your FD for a credit line

Due to the FD-backing, this type of credit card opens you up to various advantages, such as:

• Ideal for beginners

The FD-backing provides a comfortable starting point even if you have no credit history or a stable income record. It is a great option for those looking for a credit card for homemakers or a student credit card or professionals who are just starting their financial journey.

• Helps build a credit score

You can steadily build your credit history thanks to the low-barrier entry that your FD unlocks. Just spend consciously and clear credit card bills on time.

• Continued growth of savings

Despite using your FD to access credit, you need not give up its existing benefits. Your deposits continue earning returns.

• Same benefits and easier to get

Getting an FD-backed card does not mean settling for less. You still get rewards, lifestyle perks, and the same core features as a regular credit card, just with a simpler approval process.

• Quick and simple process

Since your FD serves as collateral and the eligibility criteria are simplified, your credit card application is processed in minutes with minimal documentation.

• Appropriate for emergencies

When you’re in a hurry to access funds, you can use your FD to get a credit card to skip the stringent eligibility requirements.

Crucial factors to consider with an FD-backed credit card

To make the most of the value that a credit card against an FD brings, it’s worth looking into these aspects:

• Auto-renewal mode on FD

You must either select a cumulative FD or opt to reinvest or auto-renew upon maturity. This is mandatory to maintain continuity of your deposits linked to the credit card.

• Minimum deposit requirement

You are typically required to maintain a minimum deposit amount to qualify for a credit card against an FD. Check this criterion across different issuers and credit card variants.

• Timely payments

Pay your credit card bill on time every month to avoid interest charges and late payment fees.

• Fees and charges

Some of the common charges include annual fees, interest rate, overlimit fee, etc. Check and compare them. The FIRST WOW! from IDFC FIRST Bank, for instance, comes with zero joining and annual fees.

• Differential offers

Some credit card variants offer better rewards and perks than others. It helps to compare them to make an informed choice.

Final words

A credit card against an FD brings together two financial tools that work better together. Your fixed deposit keeps earning interest while your credit card handles everyday spending and builds your credit history.

For anyone starting out, including those looking for a student credit card, an FD-backed card is one of the most accessible options available. There is no income requirement and no credit score eligibility needed, just a fixed deposit.