Secured Credit Cards: Know Eligibility, Features And Benefits

The use of credit cards is on the rise in India, as they serve a wide range of purposes from paying utility bills to shopping. Typically, banks only issue credit cards to individuals with a strong credit score. However, for those with a weak or non-existent CIBIL score, the option of a secured credit card is also available. By obtaining a secured credit card, customers have the opportunity to generate and improve their credit scores. The key aspect of a secured credit card is that it is exclusively granted against a fixed deposit held by the customer in a bank or financial institution.

Similar to a secured loan, this type of credit card is backed by collateral. The bank maintains control over the secured card, and in cases of suspected fraud or default, the bank has the authority to seize the associated FDs.

Secured credit cards operate similarly to regular credit cards, but with one key distinction, they are backed by collateral, often in the form of fixed deposits, to mitigate risk for the card issuers. Secured credit cards prove advantageous for individuals with limited or poor credit histories. Thus, they present an accessible means of enhancing one’s credit score while enjoying the advantages of having a credit card. These cards are extended in exchange for a fixed deposit which minimises the risk for credit card issuers. However, in the event of late payment or non-payment, the credit card issuer has the authority to deduct the due amount from the deposited funds.

Benefits of Secured Credit Cards

• Typically, banks grant credit cards to customers with a favourable credit record or history. However, secured credit cards provide an opportunity for individuals without a regular credit card to develop a positive credit history. By responsibly using a secured credit card and making timely bill payments, an individual can effectively build a strong credit score.
• Individuals lacking a credit history can acquire this card as a means to initiate the establishment of a credit history, thereby increasing their chances of obtaining loan approval in the future.
• If you possess multiple financial products provided by the bank, such as personal loans, auto loans, or home loans, the bank is inclined to extend loans to you at comparatively lower interest rates.
• Customers who choose a secured credit card are not required to pay any additional charges apart from the processing fee. This type of card enables cardholders to raise their credit limit while also earning interest on their fixed deposits.