What is a Secured Card?

A secured credit card, as the name suggests, is secured by collateral that the user has placed with the bank in lieu of getting approval for the card. Such a credit card is one of the best options for people without a good credit score. These secured credit cards help you in building credit and in applying for a regular credit card at later stages. These credit cards give another chance to individuals who have a poor credit score or a bad credit history to rebuild their credit. Once they have built a good credit score they can apply for regular credit cards. Banks often increase the credit limit of individuals with good repayment behaviour without asking for additional collateral deposits. This increased credit limit also adds up to the overall credit score.

What are the obligations associated with a Secured Card?

Secured credit cards work in the same way as regular credit cards but they come with some obligations. For instance, these cards require a cash deposit as collateral. This is because banks want to ensure that the individuals pay their dues in full within time. Giving credit to people with a poor credit history or not having a credit history at all is a potential risk for banks. This is why they require cash as collateral from the cardholders. The cash substantially reduces the risk for banks as they can use the collateral to compensate for any loss in case dues have not been cleared by the cardholder or no repayments have been made.

What is the difference between a Secured Credit Card and a Prepaid Credit Card?

Prepaid credit cards are similar to prepaid debit cards. You have to load a certain amount of money as per your spending capacity into your bank account and you can spend up to the limit amount with the prepaid card. These prepaid credit cards may be considered as a good option as they do not require credit checks of any type. However, they cannot be used as a credit building tool since they do not have any long-term benefits associated with them.

Applying for a Secured Card:

Applying for a secured credit card is fast and easy as banks only check your credit score and do not perform additional inquiries. You just have to complete the formalities such as documentation and deposit the collateral as per your expenditure and specific requirements and you are good to go. However, it is important to consider some important factors while choosing a secured credit card such as:

  • Benefits: Every credit card is different because it follows different customer policies of its lending bank. You should carefully choose the card which offers you maximum added benefits as per your requirements. These can be anything from discounts to reward points. It is up to you to choose the best card for you.
  • Credit Limit: It is always better to start with a medium level credit limit as depositing a one-time security and making equal monthly payments are two different things. Having a large credit limit does not mean that you would be easily able to make monthly payments. Starting from a modest credit limit helps you manage it better. Increase your credit limit slowly. For instance, you can increase your credit limit along with your monthly income. Banks also appreciate the borrowers with good repayment behaviour and sometimes they even increase the credit limit automatically without the need for additional collateral.
  • Eligibility: The eligibility criterion for secured credit card varies as per the bank’s policy. Some banks require a minimum amount deposited in your bank account for a given period of time while others require a fixed deposit with the bank. Here, the fixed deposit acts as collateral and might be used to settle dues in case you are unable to clear your dues.

Features of Secured Cards:

Secured credit cards are a good credit building tool for people with a bad credit history and individuals applying for the first time for a credit card. Some of their significant features make them a preferred choice for both these types of individuals. Such features of secured credit cards are explained below, for ease of your future reference.

  • Secured credit cards do not require additional inquiries of your credit history. It makes them a preferred choice for people who want to build up their credit.
  • The approval process is fast and easier for secured cards because the banks are already risk-free by accepting security deposit from the borrowers.
  • Most banks report about their secured credit cards to credit bureaus. This means that complete information about your credit limit and repayment behaviour is being reported. This way, people who are efficiently managing their secured cards get a chance to build a good credit score and prove themselves as reliable candidates for taking on loans or credit cards in the future.
  • Some banks also offer interest on the security deposit while the others place the deposit into an interest bearing savings account. This way you can utilise your deposit as well as enjoy the benefits of credit cards.
  • Some secured cards also come with a grace period. This means you can use a few extra days to make your payment if it has been delayed for a specific reason. However, delayed payments are also reported to the credit bureaus and as such, it is advisable to make timely payments.

Top Secured Credit Cards Available:

You should always prefer the credit cards from reputed banks as they have a significant credit value attached to them. Let us look at three secured credit cards to understand better their features, benefits, and eligibility.

  • ICICI Bank Instant Platinum Credit Card: This card is meant for the people looking for a credit card with minimum requirements. Benefits offered with this card are a result of the ICICI Bank’s initiative to give the best to their fixed deposit customers.
    • Features: This card requires no additional address, ID or income proof as it allows you to avail the card with minimal requirements. The interest rate on this card is 2.50% per month or 34.49% annually. It offers highest security level with 3 built-in microchips. The cash withdrawal fee on this card is 2.5%. The minimum fixed deposit amount is Rs. 20,000 and the minimum period for a fixed deposit is 180 days.
    • Benefits: This card provides a free credit time period of up to 50 days along with cash withdrawal up to 100% of the limit. It also offers a fuel surcharge waiver of 2.5% on all transactions. The biggest benefit of this card is the flexible credit limit that allows the cardholder to manage it efficiently.
  • ICICI Bank Coral Credit Card: This secured credit card is especially meant for people having a fixed deposit with ICICI Bank. The card is connected to your fixed deposit and 85% of the amount of fixed deposit becomes your credit limit. The borrower has to be an adult to be eligible for this card and should have at least Rs. 20,000 in his or her fixed deposit account for a period of 180 days. The fixed deposit account has to be active up to the period you are using the card. As a borrower, you will also have a grace period of 60 days within which you have to settle the dues you owe the bank. The due amount will be deducted from the fixed deposit if a borrower is not able to pay the bill amount.
    • Features: The card only requires an ID proof and no other additional documents, which make the process of getting this secured card fairly easy. This card offers several benefits to users. For instance, cardholders receive a welcome gift worth Rs. 999 from Provogue after a period of 45 days since the day of joining and payment of fees. In addition, the reward points can be converted into cash or gift vouchers. This feature offers tremendous flexibility to the users as they may use it as per their preferences. The card comes with a permanent microchip that ensures secure transactions.
    • Benefits: Joining fee with this card is fairly low at Rs. 500 only. It comes with an offer of ‘buy 1 movie ticket and get one’ absolutely free throughout the week. Also, users receive double reward points at supermarkets, for grocery shopping, and for dining out. Users also get 15% discount on food at 800 listed restaurants in addition to free airport lounge access.
  • SBI Advantage Plus Card: This is among the most preferred secured credit cards as it surpasses a regular credit card in many areas. This card requires a fixed deposit account in SBI and offers a credit limit of up to 85% of the fixed deposit limit. It is an international secured credit card and can be used at 24 million outlets worldwide including 3,25,000 outlets in India.
    • Features: This card has an exclusive extended credit option in which you can pay the minimum amount each month and carry forward the unpaid balance at the lowest charges of 2.25% per month or 27% per annum, from the transaction date. Cash withdrawal limit is up to 100% of the limit and comes with flexible payments options. The card offers an Easy Money facility under which you can get a cheque or a demand draft made and delivered to your address. Moreover, you can transfer your credit from other credit cards at nominal processing fees. Once the user has signed up for the card and paid the joining fees, an Encash facility of Rs. 25,000 or Rs. 50,000 is given to him or her and a fixed deposit opened for the amount fixed in the Encash facility. The user is billed Rs. 2,500 or Rs. 5,000 as EMI for 11 months for the Encash facility. The credit line keeps increasing with each EMI payment.
    • Benefits: The SBI Advantage Plus Card comes with a range of benefits. You can use the card at more than 1 million Visa or MasterCard ATMs globally. Moreover, you can convert your transactions into EMIs with the card’s Flexipay option. Users can share the benefits of this card with other supplementary cards in their family. In addition to these benefits, SBI gives you an interest for 555 days on your fixed deposit.