Benefits of a Secured Credit Card: A Smart Way to Build Credit History

A secured credit card is a credit card issued against a fixed deposit maintained with a bank or financial institution. The FD acts as collateral, reducing the lender's risk and making it easier for applicants to get approved. In most cases, the credit limit is linked to the FD amount, typically ranging between 50% and 100% of the deposit value.

The process of getting a secured credit card is simple:

1. Open a fixed deposit with the card issuer.
2. Apply for a credit card against the FD.
3. Receive a credit limit based on the FD value.
4. Use the card for purchases and bill payments.
5. Repay dues on time every month.

The card issuer reports your payment behaviour to credit bureaus such as CIBIL, helping build your credit history.

Given below are some of the key features and benefits of credit cards against FD:

1. Helps Build Credit History from Scratch

One of the biggest benefits of a secured credit card is that it helps individuals establish a credit history even if they have never borrowed before. Since banks report your repayment behaviour to credit bureaus, responsible usage can help you build a credit profile and improve your credit score over time.

2. Easier Approval Compared to Regular Credit Cards

Regular credit cards often require a strong credit history and stable income. Secured credit cards, on the other hand, are backed by an FD, making approval easier for first-time users and individuals with limited credit history.

3. Ideal for New Credit Card Users

Secured credit cards are often considered one of the best credit card options for first-time users because they offer access to credit without strict eligibility requirements. They allow consumers to understand billing cycles, credit utilization, statement generation, and repayment practices before moving to unsecured credit cards.

4. Helps Improve Credit Score

Timely payments and responsible credit utilization can positively impact your credit score. This makes secured credit cards a useful option for individuals looking to improve or rebuild their credit profile.

5. Offer Rewards or Cashback

With secured credit cards, cardholders can earn rewards or cashback on every spend while building credit, making them a suitable option for saving on day-to-day expenses. Depending on the card issuer, consumers can also avail other benefits such as fuel surcharge waiver, merchant discounts, milestone rewards, or accelerated rewards on select categories.

Secured credit cards can benefit several types of consumers in India:

First-Time Credit Users: Individuals with no credit history can use secured credit cards to establish their credit profile and begin building a positive repayment track record.

Students: Students who are beginning their financial journey may find secured credit cards useful for building credit history early, provided they can maintain an FD and repay bills responsibly.

Young Professionals: Newly employed individuals who have not yet established a credit score can use secured credit cards to create a strong financial foundation.

Self-employed Individuals: Consumers with an irregular income source may face difficulties qualifying for regular credit cards. A secured credit card can provide easier access to credit.

Individuals with Low Credit Scores: Those who have faced credit issues in the past can use secured credit cards to rebuild their credit profile through consistent repayment behaviour.

Homemakers: Homemakers looking to establish an independent credit profile can also benefit from secured credit cards issued against fixed deposits.

Secured credit cards are particularly suitable for beginners because they:

• Have easier approval requirements
• Require limited credit history
• Encourage responsible spending
• Help consumers understand how credit works
• Build a credit score through regular usage
• Offer benefits like rewards or cashback