Secured Credit Card

Credit

Quick Definition

A Secured Credit Card is a credit card issued against a fixed deposit (FD) or collateral, where the credit limit is backed by the deposited amount.

Detailed Explanation

A Secured Credit Card is ideal for individuals with no credit history or low credit score. The card is issued after placing a fixed deposit with the bank, which acts as security.

The credit limit is usually 75%–90% of the FD amount. These cards are regulated under banking norms by the Reserve Bank of India.

Key Features

  • Requires collateral (FD)
  • Easier approval compared to regular credit cards
  • Helps build or improve credit score
  • Credit limit linked to deposit amount

Secured vs Unsecured Credit Card

[Image comparing secured vs unsecured credit cards highlighting collateral and eligibility]
  • Secured Card: Backed by FD, lower risk
  • Unsecured Card: No collateral, based on creditworthiness

Why Secured Credit Card Matters

  • Helps beginners build credit history
  • Useful for repairing poor credit score
  • Lower risk for banks

Risks & Considerations

  • FD remains locked until card closure
  • Interest charges apply if dues not paid
  • Limited credit flexibility

Example

"If you deposit ₹50,000 as FD, the bank may issue a secured credit card with a ₹40,000 limit."

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