Why secured credit cards matter Secured cards are generally the first rung for those wanting to create or rebuild their credit history in India. They are not issued like regular cards but given against a deposit of a fixed amount, which reduces the exposure of the banks but enhances the utility of the borrowers. Secured cards allow holders to utilize the facilities of a credit card while slowly moving towards improving their credit profile and creditworthiness.
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They call for a fixed deposit as security Secured credit card is offered against an FD with the bank, which serves as collateral. This means that the bank has less exposure in the event of default by the borrower since they can recover dues from the FD. The limit of such cards usually is related to the value of the FD, usually between 75% and 90%. This makes available credit to cardholders while also allowing them to keep their FD.
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Ideal for those with no or bad credit history To most credit Histories or first-time borrowers, banks do not want to extend unsecured credit cards. A secured credit card provides an open door to the formal credit system since it does not require any existing credit score. By initially putting down a fixed amount and making responsible use of the card, one can demonstrate they can pay back, gaining credibility with lenders over time. This is particularly useful for students, homemakers, or young working individuals.
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They function just like regular credit cards Though the secured credit cards are backed by collateral, they are utilized nearly the same as normal credit cards in daily life. The owners can use them for transactions online and offline, exchange spends with EMIs, or even bills and subscription payments. Billing cycle, interest charge, and minimum due are the same. This way, cardholders not only enjoy convenience but also acquire good credit behaviour, making them future-proof for unsecured cards.
They help build your credit score One of the biggest advantages of secured credit cards is their impact on credit scores. All transactions and payments are reported to credit bureaus such as CIBIL or Experian. Timely payment helps build a good credit profile, while default destroys it. Through regular usage and discipline, cardholders can significantly enhance their scores over a span of time. Later, this better profile assists them in securing better financial products such as personal loans, housing loans, or premium credit cards.
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Interest rates and fees may vary Secured credit cards are not the same for every bank, and their terms also may be very different. Some of them have higher fees, and some of them offer good reward programs similar to regular credit cards. Interest rates for existing balances can also vary, and thus borrowers need to go through the fine print carefully. Awareness of fees like joining fee, annual fee, or late payment fee keeps the customers informed and maximizes the utility of their secured credit card.
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FD earns interest Another underappreciated benefit of secured credit cards is that the fixed deposit used as collateral continues to earn interest during the tenor. This means the FD remains active while, in the process, serving as collateral for the card. But in case the payments are defaulted by the cardholder, the bank holds the right to realize the FD partially or fully. Unless such a contingency arises, the FD remains intact, and cardholders can enjoy both availability of credit and regular interest income.
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They can be converted into unsecured cards With responsible use, secured credit cards typically become a stepping stone towards unsecured cards. If the borrower makes the regular payments on time and demonstrates good spending behaviour, banks are able to offer an upgrade. Banks even allow the transfer of a secured card to an unsecured card without a fresh application. This upgrade not only gives the cardholder increased financial freedom but also pushes their credit score, earning them higher lines of credit as well as better reward programmes.
