Credit cards are a highly convenient financial tool. They can be used to pay for everyday purchases as well as big-ticket items. Besides the convenience, credit cards offer numerous other benefits like reward points, discounts on shopping, entertainment and lifestyle spends, security from thefts, etc.
To qualify for a credit card, you need to meet some eligibility requirements. Banks usually deny credit cards to customers who have low or no credit scores, don’t meet the income eligibility requirements, hold risky job profiles, or people outside the formal job industry like freelancers, homemakers and retired individuals.
It’s the classic Catch-22 situation. A credit card can help build your credit profile, but to qualify for a credit card, you need a good credit score. So, how do you make that happen?
This is where secured credit cards come into the picture.
What are secured credit cards?
Also known as credit cards against fixed deposits, a secured credit card is one of the best ways to build your credit history from scratch or boost your poor credit profile. Unlike regular credit cards that are issued without any collateral, secured credit cards require you to provide a collateral (usually a fixed deposit) for getting approval for the card.
Secured credit cards work just like a regular credit card. You can use it to pay for online purchases, PoS transactions and much more. However, the one major difference is that these cards are issued against a fixed deposit, you hold with the bank. If you default on the credit card payment, the card issuer will recover the outstanding balance by dissolving the fixed deposit.
How do secured credit cards help to build or repair your credit scores?
Secured credit cards are a great tool to build your credit history from scratch or improve your current scores. When you pay your credit card bills on time, the card issuer reports your payments to the credit bureaus. This can help in improving your credit history and scores, especially if you’re new to the world of credit or if you’re looking to repair your credit history.
Salient Highlights of Secured Credit Cards
- Secured credit cards work the same way as regular unsecured credit cards.
- However, they require a cash deposit, usually a fixed deposit as collateral.
- The credit limit offered on these cards are determined by the amount invested in the associated fixed deposit.
- The fixed deposit has to be maintained in the same bank as the card issuing bank.
- Most banks offer credit limits up to 80 – 90% of the FD amount. For example, if you get a secured credit card against a FD of Rs. 1 lakh, then the credit limit on the card ranges from Rs. 80,000 to Rs. 90,000 depending on the card issuer.
- The minimum fixed deposit amount for a secured credit card varies from bank to bank.
- The process of approval for a secured credit card is quick and hassle-free. Since, the collateral offsets the risk borne by the lender, the eligibility requirements for a secured credit card are minimal and it’s issued instantly.
Top 5 Secured Credit Cards in India
Now that we’ve seen the benefits and features of secured credit cards, let’s check out the top 5 secured credit cards in India.
- SBI Advantage Plus Card
It’s one of the most popular secured credit cards in India. It can be used domestically as well as overseas. To apply for the card, you have to submit the credit card application form as well as the fixed deposit application form at SBI.
Credit Limit: up to 85% of the FD amount
Joining Fee: Rs. 500
Annual Renewal Fee: Rs. 500
Features & Benefits
- Cash withdrawal limit is up to 100% of the credit limit
- Worldwide acceptance at over 24 million outlets
- Comes with Flexipay option to convert your purchases into easy EMIs
- Supplementary cards are available for children/spouse/parents
- Easy Money Facility lets you receive a cheque/DD against the cash limit on the card
- Axis Bank Insta Easy Credit Card
It’s a great starter credit card for individuals who are getting their first credit card. It comes with chip & pin security, thereby making it highly secure. You can apply for the card if you hold a fixed deposit at Axis Bank or when you open a new FD at Axis Bank.
Credit Limit: up to 80% of the FD amount
Joining Fee: Nil
Annual Renewal Fee: Nil
Features & Benefits
- Enjoy free credit for up to 50 days from the date of transaction
- 1% fuel surcharge waiver on all fuel transactions across India
- Cash withdrawals up to 100% of the credit limit
- Enjoy a minimum discount of 15% under Axis Dining Delights at partner restaurants
- Global emergency assistance for card loss/theft
- Convert purchases over Rs. 2500 into easy EMIs
- Earn EDGE reward points for all transactions
- ICICI Bank Instant Platinum Credit Card
The ICICI Bank Instant Platinum credit card is a great choice for you if you’re looking for an instant credit card. The application process is quick and hassle-free and can be completed online or at your nearest ICICI bank branch.
Credit Limit: up to 80% of the FD amount
Joining Fee: Nil
Annual Renewal Fee: Nil
Features & Benefits
- Contactless payments for secure transactions at retail outlets
- Dining offers under ICICI Bank Culinary Treats Programme
- Discount up to Rs. 100 on movie tickets via BookMyShow, twice a month
- Earn Payback points on purchases
- Low interest rates of 2.49% per month
- International validity and global emergency assistance
- 1% fuel surcharge waivers at HPCL pumps
- Low minimum fixed deposit amount of Rs. 20,000
- Bank of Baroda Prime Credit Card
This card has the one of the lowest FD requirements of all secured cards in the market. Bank of Baroda assures guaranteed card issuance against an FD deposit of minimum Rs. 15,000. You don’t have to provide any other additional income proof or other supporting documents.
Credit Limit: up to 80 to 90% of the FD amount
Joining Fee: Nil
Annual Renewal Fee: Nil
Features & Benefits
- 1% cashback of all card spends
- Convert purchases worth more than Rs. 2500 into easy EMIs
- 1% fuel surcharge waiver for all fuel transactions between Rs. 400 and Rs. 5000
- Multiple redemption options for your reward points
- Free add-on cards
- Free personal accident death cover
- Kotak Mahindra 811 #DreamDifferent Credit Card
The DreamDifferent credit card from Kotak Mahindra Bank is free for life and comes with instant approval. The entire application process is online and completely paperless.
Credit Limit: up to 80% of the FD amount
Joining Fee: Nil
Annual Renewal Fee: Nil
Features & Benefits
- Choose credit limits starting from Rs. 12,000 to a maximum of Rs. 12 lakhs depending on your fixed deposit.
- Apply online in just a few steps and get the card delivered at your doorstep within 7 to 10 working days.
- Flexibility to link an existing FD or open a new FD online with Kotak Mahindra Bank.
- Low interest charges of just 2.99% per month.
- Earn 500 bonus reward points on spending Rs. 5000 within 45 days of joining.
- Multiple redemption options for rewards earned.
- Receive cashback of Rs. 750 on annual spends over Rs. 75,000.
Tips to build your Credit using a Secured Credit Card
Here are a few tips to keep in mind, while trying to build your credit using a secured credit card:
- Use the card for your regular spends, as it helps in building your credit activity. The card issuer reports all transactions on the card to the credit bureaus, thereby helping you build a healthy credit profile.
- However, remember to keep credit utilisation ratios low. Do not spend the entire credit limit on the card. This shows that you are not credit hungry, which reflects positively on your credit report.
- Avoid maxing out the credit limit and repay your outstanding bills on time and in-full. This shows that you’re credit responsible, which helps in rebuilding your credit profile.
- Final tip: don’t delay card payments. Late payments have a negative impact on your credit score and leave a black mark on your credit report.
Bottom Line
Secured credit cards are an excellent choice for individuals who don’t have a regular income like retired persons, homemakers, freelancers. It also works well for individuals who have zero or low credit scores, and those who don’t qualify for the eligibility requirements set by the bank.
Compare the best secured credit cards in the market and choose the right one that works for you.
