How FD Backed Credit Cards Work: Understanding the Mechanism

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Credit cards have become a ubiquitous financial tool worldwide, offering users convenience and instant credit. Only some people can get a credit card, especially if they have inadequate income or a low credit score.

As many people learn what is the meaning of CVV and how to use it properly, secured credit cards against fixed deposits come to the rescue. This article explores the concept of credit cards against fixed deposits, their working mechanism, eligibility criteria, and the benefits they offer to Indians.

What is a Credit Card against a Fixed Deposit?

A credit card against fixed deposit (FD) is a financial product where a bank issues a credit card to a customer in exchange for a fixed deposit that serves as collateral. This credit card type is ideal for individuals with little to no credit history or a low credit score.

By offering their FD account as security, customers can avail themselves of a credit card without relying solely on their creditworthiness.

How Does FD Act As Collateral To Avail Of a Secured Credit Card?

Traditional credit cards are unsecured and rely heavily on the applicant’s credit history and income level. In contrast, credit cards against FD require only a fixed deposit account with the bank to act as collateral.

The bank places a lien on the FD amount, which means the customer can only withdraw or utilize the FD once they return the credit card minimum due.

Eligibility Criteria for a Credit Card against FD

To be eligible for a credit card against FD, applicants must fulfill specific criteria, including:

  • The minimum tenure for the fixed deposit account should be six months.
  • Applicants must be at least 18 years old.
  • Applicants must have an FD account with the respective bank.
  • This type of credit card is only available to Indian residents and not to foreign nationals.
  • The credit card minimum due value of the FD account to apply is usually ₹10,000.

Who Can Apply For a Credit Card against FD?

Credit cards against FD are especially beneficial for the following groups of people:

  • Housemakers
  • Individuals with no income proof
  • People with low-income jobs or entry-level jobs
  • Retired individuals and those looking to build their credit score from scratch
  • People with a low credit score or poor credit history

Features of a Credit Card against FD Online

Let’s explore the key features of credit cards against FD:

Rewards: Customers can enjoy cashback, reward points, and more.

Interest-free Period: Typically, banks offer an interest-free period of 48 to 55 days on secured credit cards.

Credit Limit: The credit limit on the card is generally 75% to 85% of the fixed deposit amount.

Reasonable FD Amount: Banks offer an affordable fixed deposit amount, usually ranging from ₹10,000 to ₹25,000, to apply for a secured credit card.

Interest on FD: Cardholders can continue to earn interest on their fixed deposits while using the credit card.

Minimal Paperwork: The application process for secured credit cards involves minimal documentation.

Minimum Tenure: The FD against which the credit card is issued must have a minimum term of 6 months.

Benefits of Credit Card against Fixed Deposit (FD)

Credit cards against FD offer several advantages, including:

No Income Proof Required: Since the FD serves as collateral, applicants do not need to provide additional income proof, making it beneficial for freelancers and homemakers.

Helps Build a Credit History: Secured credit cards enable users to establish a credit history, which can help them obtain other loans in the future.

Lower Interest Rates: Credit cards against FD generally carry lower interest rates than regular unsecured credit cards due to the security provided by the FD.

Documents Required for a Credit Card against FD

All additional documentation is optional for existing FD account holders if the proofs of residence and identity submitted while opening the FD account are valid. New FD account holders must submit proof of residency and identity to apply for a credit card against FD.

How to Apply for a Credit Card on FD?

  • Existing FD account holders can apply for a credit card against FD by visiting the nearest bank branch or the bank’s website.
  • Non-FD account holders can open an FD account at the nearest bank branch. Some banks may offer complimentary credit cards upon opening an FD account. Alternatively, applicants can fill out an application form for a credit card against FD.

Also Read: What are Credit Card Reward Points?


Credit cards against fixed deposits provide an excellent opportunity for individuals with limited credit history or low credit scores to access credit facilities. By understanding what is the meaning of CVV and the mechanism and benefits of these cards, Indian residents can make informed financial decisions and leverage the advantages they offer.

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