Credit Card on FD: A Financial Lesson for Beginners
Did you recently apply for a credit card but got rejected due to a lack of credit history? Here is a smart and beginner-friendly way for you to get started - a credit card against a fixed deposit. It is like the first step of the ladder that takes you to the world of credit without having to overstep your limits. Instead of relying on a traditional credit check, banks issue a credit card against the amount you deposit in an FD.
Now, wondering if it is really worth it. How does it work? Can it help shape a solid financial future? Read this blog and understand the concept of credit cards on FDs and why to opt for credit cards on FD. A student, a young professional, or a first-time user - this guide is all you need for making informed decisions.
What is a Credit Card on FD?
A secured type of credit card, FD on these cards serves as collateral for the credit limit. Still confused? It means that the bank holds your FD as security before issuing you a credit card. The limit offered is usually a percentage of the FD value, which is ideal for people with little or no credit history.
Also, let’s consider an example: Suppose you have an FD of ₹2,00,000. The bank will offer you an insta credit card with a credit limit of ₹1,50,000. If you fail to pay off your credit card dues, the bank can use your FD to recover the amount.
Why Choose a Credit Card on FD?
Say goodbye to rejection letters! A credit card on FD is the easiest way to be a part of the credit world. Here is how:
Low-Risk for the Bank, Low-Risk for You
As a credit card on an FD is a secured credit card, the bank has the security of your FD. It means even if you default on payments, the bank can recover the amount from the FD. It is also a safer option as the credit limit is usually lower than with unsecured credit cards, perfect for keeping expenses in check. Moreover, FD allows you to get a better interest rate on your credit card.
Building Your Credit Score
When it comes to getting approved for a credit card, what do you need? A good credit score and history. First time applying for a credit card? If yes, then the Kotak credit card on FD is the way to go to build a credit score.
After getting a credit card - use it responsibly, make payments on time, and keep your balance low. The result? A solid credit score over time. After all, a good credit score opens the door to other financial products in the future.
Access to Emergency Funds
We do not face financial emergencies - said no human ever. Yes, emergencies do not tell and come. Therefore, Kotak Mahindra Bank, with its credit card on FD, offers the quickest way to access funds when you need them most. While it is not recommended to rely on a credit card for daily purchases, a credit card on FD can act as a safety net. In the event of an emergency, the Dream Different Credit Card can be a cushion without you needing to make use of your savings or other assets.
Earning Interest on Your FD
An unsecured credit card delivers the ability to borrow money; however, a credit card on FD allow you to earn interest on the FD. Wondering what it means? Along with leveraging the benefits of the credit card, your FD is still working for you, earning you passive income. The interest earned on the FD can help offset any fees or interest on the card, making it an incredible financial tool.
Summing Up
Hey beginners, start your credit journey with a credit card on FD - all with minimal risk. A tool that allows you to build credit, a credit card on FD helps you earn interest and have access to emergency funds. Another good part? It manages your finances in a controlled manner.
Planning to use a credit card for the first time or keep the unsecured card risks at bay - the Kotak 811 Credit Card against FD is an excellent option. It gives a credit limit of up to 80% of your FD amount with zero joining fees. Remember to use it wisely, spend responsibly, pay on time, and watch your credit score grow.
FAQs
- Will my FD continue earning interest while I use the credit card?
The FD remains secure and continues to earn interest unless you fail to make credit card payments.
- Can I withdraw my FD while using the credit card?
Your FD is kept as collateral. So, to withdraw the FD, you need to close the credit card account or repay all dues.
- What documents are needed to apply?
Generally, basic KYC documents, such as ID proof, address proof, and an FD account with the bank, are required.
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