Kolkata: The use of credit cards is sweeping India so much so that they have left the one popular debit cards way behind. However, one cannot get a credit card as and when one wishes to. The issuing authority has the discretion of not allowing one a credit card depending on his/her repayment details, creditworthiness etc. However, to appeal to as many customers as possible, some banks are open to the idea of offering credit cards
The biggest utility of a credit card supported by an FD is that anyone without a high credit score and/or significant income can aspire to have a credit card if one has or more FDs. According to reports, these cards are gaining popularity in India since they offer a basket of opportunities apart from helping an individual to build a credit score.
Features of FD-backed credit card
Though credit cards constitute an unsecured loan, a fixed deposit-backed credit card offers the comfort of a security for the card issuing bank. However, banks have separate criteria for issuing such credit cards. Banks can differ on minimum FD requirements and even an age limits for applicants of FD-supported credit cards. Another point to remember is that the credit limit is directly linked to the amount in the FD. Usually it is 70-90% of the amount in the FD account.
Advantage for the card user
One big advantage for the holder of the FD account is that he/she will continue to earn interest through the FD and won’t have to encash it prematurely. On the other hand, an advantage point to remember is if the borrower/user of the credit card fails to repay the loan raised through the credit card, the bank will realise the amount from the fixed deposit that has to be assigned to the bank.
However, it must be borne in mind that credit cards bear the highest interest rate among all loan instruments, and therefore, one should exercise caution while using a credit card. Else one can quite imperceptibly land in a debt trap.
A fixed deposit-backed credit card is one which is supported by one or more FDs that the applicant has. It can be very useful for an individual who has no credit history. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
