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Secured Credit Cards: If you are employed, your credit score is good and the bank feels that you can easily repay the credit card loan, then you get the credit card easily. But if your credit history is bad or credit score is in minus then your credit card application may also be rejected. In such a situation, secured credit card can be useful for you. Know what it is and how it can prove beneficial for you.
What is a secured credit card?
Generally available credit cards are collateral free, that is, you do not have to deposit any kind of security for them. You are given a credit card based on your income and score. But you get a secured credit card in exchange for the collateral deposit. If you have an FD in that bank, you can take a secured credit card in exchange for it. As long as the person has a secured card, he cannot close the FD account.
What is the limit on a secured credit card?
Generally, the limit on secured credit cards is kept at 85 percent of your fixed deposit. Meanwhile, the FD amount acts as collateral. You also keep getting interest on FD. But if the borrower is unable to repay the loan taken on credit card on time, then the bank has the right to recover the loan amount through your FD amount.
Benefits of secured credit cards
- You can improve your credit score by paying bills on time. Due to which the chances of getting loan in future can be better.
- It has lower interest rates compared to regular credit cards because it is given against FD.
- Approval is easy to obtain as it is given in exchange for a collateral deposit. No extra charge will have to be paid for this.
- Taking a credit card on FD gives the cardholder the option to earn interest on the fixed deposit account as well as increase his credit limit without any additional expense.