FD-backed credit cards: Your essential guide to build credit score with FD-backed credit cards in India

The financial services landscape has been rapidly evolving in India and with the rise of digital lending platforms, availing a credit card or a personal loan is no longer difficult. Most banks and non-banking financial companies only look for a healthy credit score and a stable income to offer a credit card to borrowers. To meet the needs of diverse customers, many banks are also offering credit cards without the requirement of a high credit score. You can now secure a credit card even without an excellent credit profile and a high income.

These credit cards, linked to a fixed deposit, could be appropriate for those with limited or no credit history. The FD-backed credit cards, unlike the traditional credit cards, come as secured credit instruments. As it’s backed by the cardholder’s fixed deposit, the banks easily approve the credit card application without raising concerns about the low credit score of the customer.

FD-backed credit cards are becoming increasingly popular in India as they offer multiple benefits and also help in building your credit score.

If you are looking to secure one of the best FD-backed credit cards in India, let’s understand how these cards work.

How FD-backed credit cards work?

• FD-backed credit cards in India are issued against the applicant’s fixed deposit.


• They offer security to the bank and flexibility to users, with the FD acting as collateral for the credit limit.


• Credit limit is decided based on the FD amount.


• Generally, banks allow up to 90% of the FD as the credit limit for such cards.


• FD-backed credit cards enable individuals with less or no credit history to obtain a credit card.

However, it’s important to note that the bank can use the FD funds to cover any outstanding amount on the credit card if you fail to pay the dues.

The advantage is that your FD will still continue to earn interest as per the pre-determined rate and you can also improve your credit score while using the card.

If you are looking to apply for a credit card, Moneycontrol offers access to a wide range of credit cards through its app and website.  Moneycontrol has partnered with top card issuers to provide credit cards with attractive features. You can choose credit cards from multiple options, as per your income and creditworthiness.

Key factors to consider about FD-backed credit cards

FD-backed credit cards are ideal for individuals who do not meet the eligibility criteria for regular credit cards due to their low credit scores or non-existing credit scores. This is important for users as it impacts the credit limit offered, the type of card one qualifies for, and the interest rates that apply. A strong score is an indicator of responsible financial behaviour, which allows the user to have control over how they want to spend using a credit card.

Here are a few key points to take into account before applying for  FD-backed credit cards in India:

• Each bank has different criteria for FD-backed credit cards, including minimum FD balance requirements and specific age limits for applicants.


• Banks may charge additional fees on FD-backed credit cards, despite their secured nature.


• Your credit card limit is directly linked to your fixed deposit. Most banks allow credit limits up to 70-90% of the linked FD account balance.


• Any non-payment or repeated default on credit card dues may lead to dilution of your FDs even before maturity.


• FD-backed credit cards may come with limited rewards and benefits, compared to traditional credit cards.

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Here’s how FD-backed can help you build credit score

It does not take a lot of effort to maintain a good credit history. One can take small steps such as focusing on timely payments, keeping credit utilisation low, among others to improve their financial credibility.

• Build credit from scratch: Securing FD-backed credit cards does not require a traditional credit history. They work even for people with poor credit history or no credit history. As these cards are easy to secure, one can begin to build a credit history through these cards.


• Make timely payment: Payment history generally makes up 35% of one’s credit score. Hence, paying bills on time is crucial to building a credit score.


• Credit utilisation ratio: The credit utilisation ratio should ideally be within 30% for a healthy credit score. This is a summary of how much credit a person uses compared to the total approved limit. An FD-backed credit card can help you build your credit score by increasing your overall available credit limit.


• Multiple credit applications: Applying for multiple credit cards in a short time can lower your credit score. Hence, it is advised to apply only when it is necessary to improve creditworthiness. As FD-backed credit cards can be easily secured, there is no need to apply for multiple credit instruments in a shorter duration.


• Build credit score over time: After 6 to 12 months of timely payments, one may request the bank to increase the credit limit. A higher limit reduces the credit utilisation ratio, which positively impacts the credit score. After responsible use and timely payments, FD-backed cardholders can request their banks to upgrade them to an unsecured credit card.

Final Words

To sum up, you need to understand the fine print before securing an FD-backed credit card. It may also impact your savings as the banks could liquidate your fixed deposit if you fail to pay the credit card outstanding.

You can check details about various credit cards on the Moneycontrol app and website.  Moneycontrol, in partnership with top credit card issuers, offers access to multiple credit cards for specific needs like shopping, travel and rewards. You can compare features and pick any of the lifetime free credit cards as per your requirements via the digital lending platform of Moneycontrol. The entire process is 100% paperless.