An FD-based credit card works like a regular credit card but requires the applicant to first open a fixed deposit with the bank. The credit limit is typically set at 75–90% of the FD amount. For instance, an FD of ₹20,000 could translate to a card limit of ₹15,000–₹18,000. The FD acts as collateral, ensuring the bank can recover dues if the cardholder fails to make timely payments.
Financial expert Rajshekhar notes, “FD-based credit cards are particularly useful for first-time credit users or those with low CIBIL scores. Regular use and timely payments gradually build a positive credit history, helping users qualify for higher-limit regular credit cards in the future.”
The application process is straightforward. Customers can either apply online via the bank’s website or submit a physical application at a branch, choosing the FD-based card option. Minimum FD amounts generally range from ₹10,000 to ₹20,000, based on the desired credit limit. Once the FD is in place, the bank issues a credit card linked to the deposit.
The benefits of FD-backed cards extend beyond credit building. Cardholders enjoy standard features such as cashback, reward points, and online payment facilities. Interest continues to accrue on the FD even while it is pledged, ensuring that the depositor’s money is not wasted. It also provides a safe platform to cultivate financial discipline through timely repayment.
However, experts caution that defaulting on payments can have serious consequences. Late fees and interest charges apply, and persistent non-payment allows the bank to recover dues from the FD. Such incidents are reported to credit bureaus, potentially lowering the individual’s credit score and affecting future loan or credit card approvals.
Once a user’s credit profile improves, they may switch to a regular credit card without an FD, unlocking higher credit limits and enhanced benefits. Nevertheless, some may choose to retain the FD-based card for convenience or continued interest accrual.
FD-backed credit cards are proving to be a vital tool in financial inclusion, allowing new and high-risk borrowers to enter the credit ecosystem responsibly while strengthening their credit profiles over time.
