Credit cards are becoming increasingly common because of their multiple offers, discounts, and financial freedom. Having a credit card in your wallet can help you optimize your savings and cover all your transactions, whether you’re shopping for electronics or anything else. However, most credit card companies are hesitant to offer credit cards to applicants with a lack of or bad credit history, a low income, geographical restrictions, or a history of employment. Therefore, issuers have designed secure credit cards for these applicants.
Secure credit cards are issued against fixed deposits and are tailored to the needs of people with no credit history or poor credit. Secured credit card credit limits are set based on the amount of the pledged term deposit. Most credit card issuers typically offer credit limits between 85% and 100% of the FD value, but cash withdrawal limits can be as high as 100% of the term deposit amount.
Learn about the benefits of secure credit cards and the factors that oppose such secure cards.
Advantages of a safe credit card
- A safe credit card is issued immediately because approval is not based on a person’s credit history or monthly income. In addition, your credit risk with your credit card issuer is reduced by merely opening a fixed deposit account with a bank.
- You can start from scratch by building/improving your credit with a secure card by taking the necessary corrective action. For instance, if you can’t pay, convert the charge to an EMI or pay off your credit card by the due date.
- At their respective banks, term deposits that have been pledged as guarantees continue to earn higher FD interest rates. The card also offers a grace period without interest for use as a credit card.
- Secure credit cards make it simpler to obtain money during tough financial circumstances, which helps increase capital efficiency. Therefore, avoid closing your FD early and incurring early withdrawal fees.
- As your credit score rises, you can improve your eligibility for unsecured credit cards and raise your likelihood of being approved for a loan.
- Credit bureaus receive information about transactions made using these cards to assist them in determining the cardholder’s creditworthiness. In India, there are four significant credit bureaus. Experian, CRIF Highmark, Equifax, TransUnion CIBIL,
Problems with safe credit cards
- If invoices for secured credit cards are not paid on time, higher funding expenses in comparison to unsecured credit cards may apply.
- Compared to ordinary credit cards, there are less secure credit card options, offers, and benefits. Most card issuers provide various unsecured credit card options catered to certain consumer demographics and spending patterns, such as B. Award cards, premium credit cards, fuel cards, travel cards, co-branded retail cards, etc.
- Before the final Rupees of the guaranteed card charge have been paid, term deposits cannot be withdrawn.