Credit Card Against FD: A Simple Way to Build Credit

May 17, 2025

7–10 minutes

Your credit score will always be a deciding factor while making important financial decisions. So why not work towards increasing it? A perfect way to do it is through a Credit Card Against Fixed Deposit (FD). A Credit Card Against Fixed Deposit (FD) offers a unique and accessible solution for individuals looking to build their credit score or gain access to credit. This type of credit card offers easy approvals, lower interest rates, and security of your fixed deposit. It is ideal for those with limited or no credit history. If you simply need a credit card without the hassle of a high credit score or aiming to improve your creditworthiness, this option could be the perfect stepping stone.

How Does Credit Card Against FD Work?

Fixed Deposit as Collateral: Backed by your fixed deposit, this card makes a secured credit card. If you default, the bank uses your FD as collateral.
Credit Limit: Depending on the bank’s terms, the credit limit usually ranges from 75% to 90% of the FD amount.
No CIBIL Score Required: You are a suitable candidate even if you have a low or no credit history. The reason behind this is that banks do not require a high CIBIL score to issue this credit card as it is a secured one.
Interest Rates: The bank possesses security in the form of the FD therefore the interest rates are generally lower than unsecured credit cards.

Feature	Secured Credit Card (Against FD)	Unsecured Credit Card
Collateral Required	Yes (Fixed Deposit)	No
Credit Limit	75%-90% of FD	Depends on Income
Eligibility	No CIBIL score required	High CIBIL score needed
Interest Rate	Lower due to FD collateral	Higher due to risk

Key Benefits of Credit Card Against FD

Easy Approval: As this is secured with your FD, approval is faster, and credit score checks are lenient.
Credit Score Building: Using this credit card responsibly helps you build or improve your credit score over time.
Low Annual Fees: These cards become affordable as many banks offer low or no annual fees for secured credit cards.
Earn Interest on FD: While you use the credit card, your fixed deposit continues to earn interest at normal rates.
Lower Interest on Revolving Credit: Interest on outstanding balances is typically lower than on unsecured credit cards.
Flexible Usage: The usage is that of a normal credit card enabling you to make online transactions, pay bills, and make purchases.

Eligibility Criteria for Credit Card Against FD

Criteria	Requirements
Minimum Age	18 Years
FD Amount	₹10,000 – ₹20,000
CIBIL Score	Not mandatory
Nationality	Indian Resident

Documents Required

Identity Proof: Aadhar Card, Passport, Voter ID, or PAN Card.
Address Proof: Utility Bill, Aadhar Card, Driving License, or Voter ID.
FD Receipt: Proof of the Fixed Deposit held with the bank.

Steps to Apply for Credit Card Against FD

Choose the Bank: Select a bank that offers credit cards against FD and has favourable terms.
Open a Fixed Deposit: Create one FD if you don’t already have one (minimum FD requirements vary).
Submit Documents: Submit KYC documents and the FD receipt.
Approval and Card Issuance: Your secured credit card will be issued after the bank processes the application and approves it.
Activate Your Card: Activate the card through the bank’s portal or customer service as soon as you receive it.

Precautions While Using Credit Card Against FD

Repayment on Time: Ensure timely repayment to avoid interest charges and maintain a good credit score.
Don’t Over-Leverage: Avoid exhausting your credit limit as this can hurt your credit score.
Interest on Revolving Credit: Always try to pay your bill in full as the interest, although lower, grows on unpaid balances.
Minimum FD Lock-in Period: Be aware of the lock-in period of your FD. Premature withdrawal may result in card cancellation.

Key Differences Between a Credit Card Against FD and a Regular Credit Card

Interest Rate: The interest rate is not fixed by MUDRA but is determined by the lending institution.
Processing Fees: Many banks do not charge processing fees for MUDRA loans, especially for the Shishu category.
Timely Repayment: Ensures better creditworthiness and opens doors to higher loan limits in the future.

Feature	Credit Card Against FD	Unsecured Credit Card
Approval Process	Easier and faster	More stringent checks
Eligibility	Requires a fixed deposit	Based on credit score & income
Credit Limit	Typically a percentage of FD (70-90%)	Based on creditworthiness
Interest Rate	Lower than regular credit cards	Higher, depending on credit score
Credit Score Requirement	No or low score required	High credit score needed
Security	Secured (linked to FD)	Unsecured
Who can apply?	Anyone with an FD	Only eligible applicants
Default Impact	FD amount may be used to clear dues	Can lead to penalty and credit score damage

The Ultimate Guide to Aadhaar Card Updates

Unique Benefits and Use Cases of Credit Card Against FD

1. Ideal for First-Time Credit Card Users

A lack of credit history is not a problem in the case of a credit card against FD. Students and young professionals who don’t possess a credit card due to the absence of credit history can now avail of this card. Now get access to credit without being rejected.

2. Credit Building for Financial Freedom

If you use your credit card responsibly, you can improve your credit score considerably. It will take just a year to witness noticeable improvements if you make payments regularly. This habit of yours will unlock better financial opportunities for you as you now open doors for yourself for personal loans, home loans, or unsecured credit cards.

3. Conversion to Unsecured Credit Card

Enjoy the opportunity of converting your secured credit card into an unsecured card by using it responsibly. Once you’ve built a solid credit profile, you may be eligible for a standard credit card with a higher limit and additional benefits.

4. Reduced Risk of Debt Trap

There is a certain limit set by your deposit when you use a secured credit card against FD. This will minimize your risk of falling into debt and save you from over-leveraging.

5. Emergency Cash Needs

A credit card against FD is of great use in case of unexpected financial emergencies. This credit card allows you to access short-term credit without liquidating your FD. You can still earn interest on your deposit while also covering immediate cash needs.

6. International Transactions

Now you would not require an additional travel card to travel or make purchases from abroad as many banks now offer the ability to use your FD-backed credit card for international purchases.

7. Reward Points and Cashback

Although these cards are secured, they still offer reward points, cashback offers, or discounts on purchases. Ultimately your experience of shopping, dining, and travel becomes more rewarding.

8. Fixed Deposit as a Safety Net

If tough situations arise where you are unable to pay your credit card bills, your fixed deposit serves as a safety net. You might lose a part of your FD but you can still save your credit score from being affected or taking legal steps regarding the context.

Additional Tips for Maximizing the Use of Credit Card Against FD

1. Set Up Auto-Pay

Set up automatic bill payments through your bank account to avoid missing payments. When you make payments on time, your credit score remains healthy and you make yourself open to better financial products.

2. Monitor Your Credit Utilization Ratio

Aim to keep your credit utilization ratio below 30% to have a positive impact on your credit score. Let’s say your card has a limit of ₹50,000; try to keep your outstanding balance below ₹15,000 at all times.

3. Use It Like a Debit Card

We know the card you are possessing is a credit card, but try to use it as a debit card. By following this habit, you will only spend what you can afford to repay in full each month. If you are on a roll to build credit history, this will help avoid interest charges.

4. Watch Out for Hidden Fees

The card you are holding is a secured one and has fewer fees, still be vigilant about any hidden fees such as foreign transaction fees, late payment fees, and annual charges. Don’t forget to read the fine print before applying.

Real-World Example

Here’s a quick example of how a Credit Card Against FD can benefit someone:

A Practical Case: Let’s say Rahul, who is a new college graduate, wants to apply for a credit card but doesn’t have a credit score yet. What he does, is that he opens a fixed deposit with ₹50,000 at his local bank, which offers him a secured credit card with a limit of ₹40,000 (80% of the FD). During one year, Rahul uses the card for small, manageable purchases and pays off the balance in full every month.

The Certain Outcome: His credit score improves significantly within a year, allowing him to apply for an unsecured credit card with better rewards and higher credit limits.

Conclusion

With benefits like lower interest rates, easy approval, and continued interest earnings on your fixed deposit, the option of a credit card against FD helps you achieve financial flexibility while minimizing risks. Along with this, it helps you build credit and is a safer alternative to unsecured cards. If you want to gradually transition to regular credit cards, this card is an excellent choice.

This post is written by our content team who believes financial choices should empower your lifestyle

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