Secured credit cards are a practical option for those looking to build or repair their credit score. By disciplined usage and timely repayments, you can improve your creditworthiness and eventually qualify for financial products.
Secured credit cards are a viable solution for people with poor or no credit history. These cards help build or repair credit scores over time. Here’s a detailed look at secured credit cards available in India, focusing on their benefits, eligibility criteria, and key features.
So, what exactly is a secured credit card? A secured credit card is backed by a fixed deposit (FD) held with the issuing bank. The credit limit is usually a percentage of the FD amount, often ranging from 80% to 100%. This reduces the risk for the bank, making it easier for individuals with poor credit scores to get approved.
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What Are the Key Benefits of Secured Credit Cards?
- Credit Score Improvement: Regular use and timely payments can improve your credit score.
- Approval for Individuals with Poor Credit: Easier approval compared to unsecured credit cards.
- Earn Interest on FD: The underlying fixed deposit continues to earn interest.
- Controlled Spending: The credit limit is linked to the FD, preventing overspending.
- Access to Credit Facilities: Offers a way to access credit without the need for a high credit score.
| Secured vs. Unsecured Credit Cards | ||
| Feature | Secured Credit Card | Unsecured Credit Card |
| Approval Criteria | Requires a fixed deposit (FD) | Based on income and credit score |
| Credit Limit | Linked to the FD amount | Based on income and credit history |
| Interest on Deposit | Yes, FD earns interest | Not applicable |
| Income Proof | Not required | Required |
| Credit Score Requirement | Low or no credit score needed | Good credit score required |
| Global Acceptance | Yes | Yes |
| Rewards and Benefits | Similar to regular credit cards | Often better rewards and benefits |
| Upgrade Option | Can be upgraded to an unsecured card | Not applicable |
| Risk for Bank | Low (secured by FD) | Higher (unsecured) |
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Important Considerations
- Timely Payments: Ensure on-time payments to improve your credit score.
- Monitor Credit Utilisation: Keep credit utilisation low to positively impact your credit score.
- Check Fees and Charges: Be aware of any annual fees, late payment charges, or other fees associated with the card.
Adhil Shetty, CEO of Bankbazaar.com says, “Secured credit cards are a great tool for rebuilding a poor credit score, but unsecured credit cards offer a wider range of benefits. These can include rewards programmes, cashback offers, dining discounts, travel perks, and many more. To make the most of these advantages, it’s important to compare different credit card options and choose one that best aligns with your lifestyle and spending habits. Timely payments of your dues is very important in case of both types of cards to keep your financial health intact.”
Secured credit cards are a practical option for those looking to build or repair their credit score. By disciplined usage and timely repayments, you can improve your creditworthiness and eventually qualify for financial products.
