Starting Your Credit Journey with FD-backed Credit Cards

FD-backed credit cards are suitable to start your credit journey as they are specifically designed for individuals who are:

• New-to-credit without any credit history or credit score
• Students, fresh graduates or first-time earners
• Self-employed without formal income proof
• Recovering from a low credit score
• Users who want to build credit profile without taking loans

The above-mentioned users usually struggle to get their loan or credit card applications approved, which consequently makes it difficult to build a strong credit score too. In such cases, secured credit cards against FD can benefit them the most, as given below:

• Easy Approval

Since these credit cards are secured against your FD, banks approve these cards with minimal eligibility checks without any income proof, making them accessible to students and beginners

• Credit Score Building

All FD-backed card transactions and repayments are reported across credit bureaus, helping you establish a credit history and building a strong credit score.

• Low Risk of Debt Trap

Your card is backed by your own fixed deposit which reduces the chance of default. Moreover, it also promotes disciplined card usage as your spending is limited as per your FD amount.

• Earn While You Spend

Your FD, against which the secured credit card is issued, continues to earn interest even while it is pledged. This further adds to any value-back you may earn through rewards accrued on card spends.

• Upgrade Opportunity

With consistent usage, you can later upgrade to regular unsecured credit cards which do not require an FD.

Using an FD-backed credit card responsibly can positively impact your credit score over time through the following ways:

• Creates a Credit Footprint

These FD-backed credit cards help you enter the formal credit system by establishing your credit profile even without any prior loans or access to any other credit line.

• Builds Payment History

Your credit card bill payments are reported to credit bureaus. Timely bill payments improve your repayment track record, thus building a positive credit profile and a good credit score.

• Improves Credit Utilisation Ratio

Since the credit limit of your secured credit card is linked to your FD, it also restricts excessive spending. Controlled spending within your budget by using a limited portion of your limit improves credit utilisation ratio (CUR) and signals responsible credit behaviour.

Here’s how you can use FD-backed credit cards smartly to build a strong credit score and maximise the benefits:

• Pay Full Dues on Time: Always pay the full outstanding amount before the due date to avoid interest charges and any negative impact on your credit score.
• Avoid Minimum Due Payments: Paying only the minimum due comes with high interest charges which over time can pile-up and lead you to a debt-trap. This slows down your credit score improvement.
• Keep Credit Utilisation Low: Avoid over-spending and limit card usage within your usual monthly budget. High spending can make you struggle with your bill repayments and portray you as credit hungry.
• Use the Card Regularly: Make small, consistent transactions every month to build credit activity.
• Maintain Your FD: Avoid prematurely closing the FD, as it may lead to card closure and impact the length of your credit history.

Given below are some of the best FD-backed credit cards for those beginning their credit journey: