Secured Credit Cards

Secured credit cards work a lot like normal credit cards. The primary difference is that a secured credit card is provided against collateral, such as fixed deposits to lower the risk level for card issuers.

Secured credit cards are beneficial for consumers who have no or bad credit history. Therefore, it is one of the easiest ways to improve your credit score while availing the benefits of a credit card. These cards are offered against a fixed deposit which reduces the risk for credit card issuers. However, if you don’t pay your bill on time, the credit card issuer can take the money from your deposit.

The most important factor of a secured credit card is that it is issued only against some kind of fixed deposit which the customer has in bank or any financial institution. It is basically issued to those customers who are unable to get normal credit cards because of the current income criteria or bad credit history. Therefore, these cards are secured as the bank with which the deposit has been made has full right to liquidate the deposited amount in order to recover your debts if there is a situation of default on the payment terms.

The customer holding this kind of credit card has to continue with the fixed deposit with the bank till he/she uses this secured credit card. These cards work very much similar to those of normal credit cards and the cardholder can also earn interest on the deposit with the bank or any of the financial institutions.

Given below is the list of some of the best secured credit cards in India:

Credit Card	Annual Fee	Key Feature
Axis Bank Privilege Easy Credit Card	Rs. 1,500	10 reward points per Rs. 200 spent
Axis My Zone Easy Credit Card	Rs. 500	25% cashback on movies
SBI Card Unnati	Free for first 4 years Rs. 499 (5th year onwards)	1 reward point per Rs. 100 spent
AU Nomo Credit Card	Rs. 199	2 reward points per Rs. 100 spent
IDFC FIRST WOW Credit Card	Nil	4X rewards on travel spends

Some of the key benefits of secured credit cards are as follows:

Higher chance of approval: Since secured credit cards are issued against FDs, the approval of the credit card is guaranteed even if you have a poor credit score. Additionally, in comparison to general card applications, these involve minimal documentation and paperwork.

Helps in building credit score: In cases when consumers with no or bad credit history find it difficult to avail themselves of a new credit card, secured credit cards can be really helpful. Getting a secure card and ensuring responsible usage with on-time and full payments by the due date helps in building a positive credit record, ensuring lenders of the credibility.

Dual benefits: With a secured credit card, cardholders can earn the best benefits of both credit cards and fixed deposits. They can keep earning the interest on their fixed deposits while availing themselves of the benefits of a credit card at the same time.

Rewards/Cashback: Credit cards are feature-loaded with rewards, discounts, or cashback benefits that offer real value-back, depending on the card type. This helps cardholders to save on their everyday spends.

Additional benefits: Beyond rewards and cashback, credit cards offer additional benefits, such as lounge access, memberships, brand benefits, etc., that regular fixed deposit customers don’t get.

Secured credit cards can be a good choice for the following:

• Beginners with entry-level jobs
• Retired/Aged individuals with no regular source of income
• Individuals with poor credit history; to whom banks are not offering unsecured cards
• Individuals who do not have income proof, but need a credit card
• Home-makers, unemployed people
• Students

Note: The customer holding a secured credit card has to continue with the fixed deposit with the issuer till he/she uses the card.

Applying for a secured credit card is simple and can usually be done online or at the nearest bank branch. Follow these steps to get started:

1. Check Eligibility: Ensure you meet the bank’s basic requirements such as minimum age, income source, and a valid fixed deposit (FD) amount.

2. Choose the Right Card: Compare different secured credit cards based on annual fees, reward programs, interest rates, and FD requirements.

3. Open a Fixed Deposit: Most secured credit cards require you to open a fixed deposit with the bank. The FD amount acts as collateral and usually determines your credit limit.

4. Fill Out the Application Form: Provide your personal details, PAN card, address proof, and income documents (if asked). Many banks also allow online applications for faster processing.

5. Verification & Approval: Once your application and FD are verified, the bank will issue your secured credit card.

6. Start Using Your Card: After activation, you can use the card just like a regular credit card for shopping, travelling and other transactions.

What is the difference between a secured credit card and a prepaid credit card?
In case of a prepaid credit card, you have to load a certain amount of money as per your spending capacity into your bank account and you can spend up to the limit amount with the prepaid card. These prepaid credit cards may be considered a good option as they do not require credit checks of any type. However, they cannot be used as a credit-building tool since they do not have any long-term benefits associated with them.

Why do I need a fixed deposit for a secured credit card?
You need a fixed deposit to get a secured credit card because this deposit acts as collateral or security against which the credit card is issued to you. As it is already explained that a secured credit card is best suited for those with no, low or poor credit scores, a fixed deposit covers the card provider in case of any irregularities in payment.

Can a secured credit card build your credit score?
A secured credit card is meant for individuals who have a low or poor credit score. It can help you build/rebuild or improve your credit score,  provided payments are included in your credit report and you make on-time bill payments.  You may be eligible to apply for a regular credit card once your credit score is improved.

Can you be rejected for a secured credit card?
Getting rejected for a secured credit card is not so common since you are already paying a security deposit, in the form of a fixed deposit, to cover the card provider in case of any irregularities in payment. However, in some cases, the account is checked by the card provider. If you happen to have a bankruptcy on your record, a pattern of late payments, inadequate sales or other suspicious activities, your application may get rejected.

Will the fixed deposit cover my monthly credit card bills?
No, the monthly credit card expenses are not protected by the fixed deposit. All the credit card payments should be made in the same way as that of a regular credit card. If you skip your credit card payment for two consecutive payment periods, the bank retains the ability to reclaim all existing dues on your credit card from your fixed deposit account.

I do not have a fixed deposit in the bank. How will I get the secured credit card?
You will have to invest in a fixed deposit at first and then you can apply for a secured credit card with the bank.

What is the credit limit offered on the secured credit card?
The credit limit offered on the secured credit card is up to 80 – 90% of the fixed deposit done with the bank. However, certain cards also offer up to 100% credit limit of the fixed deposit amount.

I want to get a higher credit limit. What should I do to get a higher limit on my secured card?
You should invest a higher amount in the fixed deposit. The more you invest more are the chances of getting a higher credit limit on your secured credit card.