FD-backed Credit Cards for Self-employed

An FD-backed credit card is issued against a Fixed Deposit (FD) that acts as collateral with the bank. The credit limit is usually 80% to 100% of the FD amount. Unlike regular credit cards, credit cards against FD do not require any income proof, and approval is generally easier with minimal documentation. Hence, they are suitable for self-employed individuals to get access to credit for daily expenses.

FD-backed credit cards are particularly suitable for businesspersons due to the following reasons:

No Income Proof Required

FD-backed credit cards do not depend on your salary slips, ITR, or business income proof. Instead, your fixed deposit acts as the primary security for the bank. This makes the approval process much simpler for self-employed individuals whose income may fluctuate or be hard to document. Even if you don’t have a traditional income record, you can still get access to a credit card.

Guaranteed Approval

Since the credit card is secured against your fixed deposit, the bank’s risk is significantly reduced. This is why the approval is almost guaranteed as long as you have an active FD with the bank. Unlike regular credit cards, there is no strict credit score or income requirement for eligibility. This makes it an excellent starting point for first-time credit users.

Access to Credit

Self-employed individuals often face challenges in getting approved for loans or credit cards due to irregular income. FD-backed credit cards solve this problem by offering a credit limit based on your deposit amount. This allows you to access credit without any income requirement. You can use the card for daily expenses, and earn benefits on your spends.

Dual Savings (FD Interest + Value-back)

One of the biggest advantages is that you continue to earn interest on your fixed deposit while using the credit card. At the same time, you can also earn cashback/reward points, and other benefits on your card spends. This helps you maximize savings on your daily expenses. Additionally, when you close the FD, you receive the principal amount along with the accumulated interest.

Build or Improve Credit Score

Using an FD-backed credit card responsibly helps you start building a credit history from scratch. Every timely payment gets reported to credit bureaus, which gradually improves your credit score. Even small, regular transactions can have a positive impact when managed well. This is especially important for self-employed individuals who may not have any previous credit history.

Improves Future Eligibility

Once you maintain a good repayment track record, issuers start viewing you as a low-risk borrower. This increases your chances of getting unsecured credit cards, personal loans, and even higher credit limits in the future. Over time, you can transition from secured to unsecured credit products.

With credit cards against FD, self-employed individuals can get access to credit based on their FD amount and build a strong credit profile through responsible usage. This helps them become eligible for unsecured credit products in the future.

To understand this better, let’s look at a simple infographic that shows how secured cards can help business owners build their credit history while maximizing their savings.

FD-backed credit cards are suitable for:

• Self-employed individuals without formal income proof
• Freelancers with irregular income source
• Small business owners
• Individuals with low or no credit score
• Those who have faced credit card rejection earlier