Best Credit Cards against FD in 2020

Credit cards against FD (Fixed Deposit) also known as Secured credit cards are credit cards issued to people who have a low credit score or have no source of documented income. These cards are issued against a bank’s fixed deposit as lien. The credit limit for a credit card against FD is usually a percentage of the FD balance. A lien is marked on the fixed deposit until the bill is settled. In case the cardholder defaults on payment, the FD is used to settle the dues.

Well, read on to know everything about credit cards against FD and find out, which are the best credit cards in this segment.

Why should one go for a credit card against FD?

Credit card against FD is best suited for people who have itchy credit score or credit history; thus are facing difficulty in getting a credit card. These credit cards are the best way to improve that itchy credit history and credit score.

Nonetheless, credit card against FD is also best suited for people who have low/irregular income or no documented source of income (many small entrepreneurs and self-employed people would fall in this category). Further, these cards also suit people who are just a few months in their new job or are retired with no steady income source.

What about the credit limit?

The credit limit on these cards is a factor the fixed deposit kept with the bank. Typically, banks would give a credit limit of anywhere 70-80% of the FD amount. Therefore, if one has a fixed deposit of INR 50,000 with the bank, then he can get a credit limit of around 35-40k on credit card against FD. Most banks require a minimum 20K FD to avail these cards.

What are the benefits of credit cards against FD?

The biggest benefit is that there is hardly any rejections for these credit cards. As these are secured against your own fixed deposits, banks have no problems issuing them. Further, the interest rates charged on these credit cards are lower compared to other credit cards.

That’s not all, these cards help improve the credit score of the user. Provided, one is regular in making monthly payments against the credit card bills. Thus once the score improves, one can get other credit cards from the same bank or another bank based on higher credit score and past payment record.

What happens to my FD with the bank?

Nothing. The fixed deposit in the bank is safe and continues to earn regular interest. Only in the case of default against credit card dues, the bank will liquidate the FD and settle the bill. Therefore, as long as one regularly pays the credit card bill, the FD will continue to earn interest. Just that one has to keep on renewing the same until the time one holds the credit card.

Best credit cards against FD in India

Nearly all major banks issue credit cards against FDs. However, as always with credit cards, there is no one card fits all. Thus, I decided to list the best credit cards as per spend levels.

Best credit card for annual spends below 1lakh

For annual spends below 100,000, the best credit card against FD is SBI Unnati Credit Card

SBI Unnati Credit Card

Fees and Eligibility:

• Minimum fixed deposit of INR25,000 with SBI
• No joining fee. No annual fees for the first 4 years. Post that annual fee of 499/annum + GST

Rewards and Benefit:

• Recurring Benefit:
  • Cashback of INR500 on achieving spends of INR50,000 in a year.
• Reward Points:
  • 1 Reward point on every INR100 spent. 1 Reward point = 0.25 paisa (0.25% reward rate at the best)
  • 1% fuel surcharge waiver

Takeaway:

This is a very simple credit card that fits well with someone who spends less than INR100,000 per annum. The cashback of INR500 on annual spends of INR50,000 improves the reward rate to 0.75% from a meagre 0.25% otherwise. Moreover, there is no joining fee and no annual fee for the first 4 years. To be honest, 4 years is a sufficient time for anyone to improve credit score and move on to better credit cards. Thus, one can say that this credit card is virtually free for life.

Best credit card for annual spends between 1-4lakhs

For annual spends between 1-4lakhs per annum, there are two good credit cards in this bracket ICICI Bank Coral credit card and Axis Bank Insta Easy credit card.

Axis Bank Insta Credit Card

Fees and Eligibility:

• Minimum fixed deposit of INR20,000 with Axis Bank
• No joining fee and no annual fee i.e. lifetime free credit card

Rewards and Benefit:

• Recurring Benefit:
  • None
• Reward Points:
  • 6 reward points for every INR200 spent. 1 Reward point = 0.20 paisa (0.60% reward rate)
  • 1% fuel surcharge waiver

ICICI Bank Coral Credit Card

Fees and Eligibility:

• Minimum fixed deposit of INR20,000 with ICICI Bank
• Joining fee of INR500 +GST. Annual fee of INR500 + GST waived on an annual spend of INR125,000 or more

Rewards and Benefit:

• Recurring Benefit:
  • Buy 1 Get 1 movie tickets on BMS, twice a month.
• Reward Points:
  • 2 payback points for every INR100 spent. 1 Reward point = 0.25 paisa (0.50% reward rate)
  • Accelerated reward points: 2x payback points on dining, grocery and supermarket spends
  • 1% fuel surcharge waiver
• Lounge access: 1 complimentary domestic lounge access every quarter.

Takeaway:
At around 1.5-2lakh annual spend the rewards rate for both of these cards is more or less the same on the base reward rates. However, thanks to 2x reward points on select categories, ICICI Coral credit cards marches ahead in terms of reward rate compared to Axis Bank Insta credit card. Further, offers such as Buy 1 Get 1 on BMS and complimentary lounge access makes ICICI Coral credit card a great credit card to have in the wallet.

Best credit card for annual spends above 4lakhs

For annual spending above 400,000 per annum, Yes Bank’s Prosperity Rewards Plus credit card is the best

Yes Bank Prosperity Reward Plus credit card

Fees and Eligibility:

• Minimum fixed deposit of INR30,000 with Yes Bank
• Joining fee of INR350 +GST. Annual fee of INR350 + GST waived on an annual spend of INR25,000 or more

Rewards and Benefit:

• Recurring Benefit:
  • 12,000 reward points on spending 360,000 every year.
• Reward Points:
  • 2 reward points for every INR100 spent. 1 Reward point = 0.25 paisa (0.50% reward rate)
  • Accelerated reward points: 3 reward points on grocery and supermarket spends
  • 1% fuel surcharge waiver

Takeaway:

At lower spend level, i.e. below 360,000 annual spends, the reward rate on this card is very mediocre. However, if one can meet the spending criteria of 360,000/annum the reward jumps to 1.3%+. Also, the accelerated reward points in the grocery and supermarket category can further enhance the reward rate.

Other credit cards against FD

Below are the details of other credit cards that are available against FDs. Also, here are the links for calculations done to arrive at reward rates of the above discussed credit cards (Spends of 100,000, 150,000 and 400,000).

Conclusion

Credit cards against FDs are the best way to get a credit card for someone with a low credit score and a great way to build a credit history. However, one has to be diligent in making bill payment in full and on time.

Do share your experiences of using credit cards against FDs. Also, do let me know if you want the excel sheets used for calculations.