Key Takeaways
- A credit card against fixed deposit is secured by a fixed deposit, while an unsecured credit card requires no collateral.
- Eligibility for a secured credit card depends on the fixed deposit, whereas unsecured cards rely on creditworthiness.
- Both card types can be used for everyday credit transactions, including online and merchant payments.
- A credit card against fixed deposit can suit first-time credit users or those with limited credit history.
- Comparing eligibility, fees, credit limits, and repayment terms helps you choose the right credit card.
Credit cards are available in different forms, with each serving different customer requirements. While some cards are issued based on a customer’s income and credit profile, others are backed by a fixed deposit, making them accessible to individuals who don’t have an established credit history.
Understanding the difference between a credit card against fixed deposit and an unsecured credit card can help you choose the right option based on your eligibility, financial requirements, and credit goals.
What is a credit card against fixed deposit?
A credit card against fixed deposit is a secured credit card issued against a fixed deposit maintained with the bank. The fixed deposit acts as collateral, reducing the issuer’s credit risk while allowing the cardholder to access a credit limit linked to the deposit amount.
The card functions like any other credit card. It can be used for online purchases, merchant payments, utility bill payments, and other eligible transactions. The linked fixed deposit continues to earn interest according to its applicable terms while remaining under lien for the duration of the card.
What is an unsecured credit card?
An unsecured credit card is issued without any collateral. The issuer evaluates factors such as income, employment, existing credit obligations, repayment history, and credit score before approving the application.
The credit limit is determined by the issuer’s assessment of the applicant’s repayment capacity. Since the card is not backed by collateral, eligibility requirements are more stringent than those for secured credit cards.
Credit card against fixed deposit vs unsecured credit card
Although both card types provide access to a revolving credit limit, they differ in several important ways.
- Eligibility
A credit card against fixed deposit is issued against a fixed deposit, making it suitable for customers who do not have an established credit history or who are beginning their credit journey.
An unsecured credit card is issued after assessing the applicant’s income, credit profile, repayment history, and other eligibility criteria.
- Credit approval
Since the fixed deposit serves as collateral, approval for a secured credit card is linked to the deposit requirements specified by the issuer.
Approval for an unsecured credit card depends on the issuer’s credit assessment and internal eligibility criteria.
- Security
A secured credit card is backed by a fixed deposit that remains under lien while the card is active.
An unsecured credit card does not require any collateral because it is issued based on the applicant’s creditworthiness.
Which option should you choose?
The right choice depends on your financial profile and eligibility.
A credit card against fixed deposit is suitable for first-time credit users, individuals with limited credit history, or customers who want access to credit through a secured structure.
An unsecured credit card is generally suitable for applicants who meet the issuer’s income and credit requirements and are eligible for a card without providing collateral.
Before making a decision, compare the eligibility criteria, fees, credit limit, repayment terms, and other applicable charges associated with each option.
Conclusion
Both secured and unsecured credit cards provide access to credit, but they differ in their eligibility requirements, approval process, and credit assessment. A credit card against fixed deposit offers a structured way to access credit by linking the card to a fixed deposit, while an unsecured credit card is issued based on the applicant’s credit profile.
Frequently Asked Questions
- What is a credit card against fixed deposit?
A credit card against fixed deposit is a secured credit card issued by linking a fixed deposit as collateral. The credit limit is generally linked to the value of the fixed deposit, subject to the issuer’s policy.
- What is the main difference between a secured and an unsecured credit card?
A secured credit card is backed by a fixed deposit or another form of collateral, while an unsecured credit card is issued based on factors such as income, credit history, and repayment profile.
- Does the fixed deposit continue to earn interest?
Yes. The fixed deposit continues to earn interest according to its applicable terms while serving as collateral for the credit card.
