A fixed deposit is one of the most preferred modes of investment in India and an FD that also provides you with a credit card, i.e. a credit card against FD, is a win-win situation for the risk-averse investors/customers and for those who wish to build/improve their credit score.
What is a Credit Card against FD?
A credit card against fixed deposit or FD is a secured credit card. Having a fixed deposit account is the prerequisite of getting a credit card against FD. Many banks like SBI, SBM Bank (India), etc. offer this feature with their FDs.
The prime feature of this credit card is that the linked FD is lien marked, i.e. acts as collateral. The credit limit is generally 80%-90% of the FD amount. It should be noted that the lien-marked FD keeps on earning interest.
In case the cardholder misses the payment of the monthly credit bill, the bank can redeem the linked FD to recover the outstanding amount. Fees charges on a credit card against FD is usually lower than an unsecured card and these cards are easily approved.