FD-backed credit cards only for bad credit?

FD-backed credit cards often called “secured credit cards” are widely misunderstood. A common assumption is that they’re only meant for people with bad credit. That’s not quite true. While they do serve as a lifeline for those rebuilding their credit profile, their usefulness goes far beyond that narrow purpose.

FD-backed credit cards often called “secured credit cards” are widely misunderstood. A common assumption is that they’re only meant for...Read more

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What is an FD-backed credit card?

An FD-backed credit card is issued against a fixed deposit (FD). The credit limit is typically a percentage of that deposit, often 80% to 90%. Because the bank holds your FD as collateral, the risk is minimal, which makes approval much easier compared to regular unsecured credit cards.

Why they’re associated with “bad credit”

There are several reasons mentioned below why consumers think credit cards against FD is only for consumers who have bad credit:

They’re often marketed to consumers with low or no credit scores
Approval doesn’t depend heavily on income proof or credit history
They’re used as tools to rebuild credit after defaults or missed payments

So yes, they’re commonly used by consumers trying to recover financially.

Who else should consider them?

FD-backed cards can actually be a suitable option for several groups:

First-time credit users: If you’ve never taken a loan or used a credit card, you don’t have a credit score yet. These cards help you start building one safely.
Students and young professionals: Without a steady income or long financial history, getting a regular credit card can be tough. An FD-backed card gives access to credit early on.
People who want controlled spending: Since your credit limit is tied to your own deposit, it naturally prevents overspending. This makes it useful for those who want discipline without temptation.
Risk-averse individuals: Some people simply prefer not to rely on unsecured debt. With an FD-backed card, your exposure is limited to what you’ve already set aside.
Those looking to build or improve credit strategically: Even if your credit score is decent, using one of these cards responsibly can strengthen your credit profile over time.

Key advantages

- Easy approval: Minimal eligibility requirements
- Credit building: Regular usage and timely payments improve your score
- Lower risk: Your FD acts as a security
- Rewards & benefits: Many cards still offer cashback, rewards, and EMI options

Things to watch out for

They might not be the best choice because:

Your money is tied up as long as the card is active
Lower credit limit compared to unsecured cards
Your FD earns interest, but that money isn’t liquid
Some cards still charge annual fees or interest if unpaid

FD-backed credit cards aren’t a last resort; they're a financial tool. Like any tool, their value depends on how you use them. For someone rebuilding credit, they can be a stepping stone. For a beginner, they’re an entry point. And for others, they’re simply a way to stay disciplined while availing the benefits of credit.

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How to Apply for a Credit Card Online?

Step 1: Enter your mobile number in the application form

Step 2: Provide your personal details

Step 3: Enter OTP to verify your mobile number

Step 4: Select the credit card purpose and credit card amount

Step 5: Compare offers and apply for the best-suited credit card

Apply Now

FAQs

Are FD-backed credit cards meant only for people with poor credit scores?

No. Although they are commonly used by people rebuilding credit after defaults or missed payments, they are also used by first-time borrowers, students, and individuals without a formal credit history. Since approval depends largely on the fixed deposit, banks place less emphasis on past borrowing records.

How is the credit limit decided on an FD-backed credit card?

The credit limit is generally linked to the fixed deposit amount. Most banks offers a limit of around 75% to 90% of the FD value. For instance, a Rs. 1 lakh deposit may result in a card limit ranging from Rs. 75,000 to Rs. 90,000, depending on the issuer’s policies.

Do FD-backed credit cards affect credit scores?

Yes. These cards are reported to credit bureaus in the same way as unsecured credit cards. Payment history, credit utilization, and repayment consistency can influence the user’s credit score. Delayed payments may negatively affect the score, while timely repayment may gradually strengthen the credit profile.

Why are FD-backed credit cards easier to get approved?

Banks treat the fixed deposit as collateral, which reduces lending risk. Because of this, income requirements and credit history checks are often less strict than those for unsecured cards. However, applicants may still need to meet age, KYC, and minimum deposit requirements set by the bank.

Can the bank use the fixed deposit if the bill is unpaid?

Yes. If the cardholder repeatedly fails to repay outstanding dues, the bank may recover the amount from the linked fixed deposit. This is one reason these cards are considered lower risk for lenders. In such cases, the cardholder may also face penalties and credit score damage.