Struggling with poor or no credit history? A secured credit card could be your solution!
1. What is a Secured Credit Card?
- A secured credit card is linked to a Fixed Deposit (FD) with the issuing bank.
- Credit limit: Usually 80%-100% of the FD amount.
- Easier approval: Ideal for individuals with poor or no credit history.
2. Benefits of Secured Credit Cards:
- Credit Score Improvement: Timely payments can boost your credit score.
- Easy Approval: No high credit score or income proof required.
- Earn Interest: FD continues to earn interest while you use the card.
- Controlled Spending: Credit limit is linked to the FD, preventing overspending.
- Global Acceptance: Use it like any regular credit card worldwide.
3. Secured vs. Unsecured Credit Cards:
| Feature | Secured Credit Card | Unsecured Credit Card |
|---|---|---|
| Approval Criteria | Requires an FD | Based on income & credit score |
| Credit Limit | Linked to FD amount | Based on income & history |
| Interest on Deposit | Yes, FD earns interest | Not applicable |
| Credit Score Required | Low or none | Good credit score required |
| Rewards & Benefits | Similar to regular cards | Often better benefits |
| Upgrade Option | Can be upgraded to unsecured | Not applicable |
4. Key Considerations:
- Timely Payments: Always pay dues on time to improve your credit score.
- Credit Utilisation: Keep utilisation low for a positive impact on creditworthiness.
- Fees & Charges: Be aware of annual fees, late payment penalties, etc.
Pro Tip:
Use your secured card responsibly to build your credit score. Over time, you may qualify for an upgrade to an unsecured card with better rewards and benefits.