Today, technology has largely influenced the way we carry out/operate our financial transactions. One of the most common and latest innovations is a digital credit card that has remarkably impacted our credit usage and our daily expenses.

With just one click, today you can make payments easily regardless of the purpose or amount. Hence, the dependency on digital wallets cannot be neglected. Moreover, several credit card apps and financial platforms have a credit score tracker helping you to consistently check your credit score.

A virtual credit card provides certain key features like accessibility & flexibility, enhanced security features, customizable limits and integration with mobile apps, which makes it one of the premier financial tools.

Apart from a digital credit card, did you know that you can also avail of an FD-backed credit card, which can also offer similar benefits?

Understanding An FD-backed Credit Card

An FD credit card is a secured credit card granted by a bank against a Fixed Deposit you hold with them. An FD backed credit card makes use of that fixed deposit as security, providing you access to credit without withdrawing the deposit. The FD acts as collateral for the credit card, and the credit limit is usually determined by the amount deposited in the FD.

Your FD will continue to earn interest at the universal rate throughout the tenure. The only restriction is that you cannot prematurely close or break the FD while the credit card is active. If you decide to close the credit card, the FD is released.

The credit limit on a credit card against a Fixed Deposit is normally 80% - 90% of the principal amount deposited in your FD. However via a few banks, which may provide up to 100% based on their particular policy.

Benefits Of Using An FD-Backed Credit Card

• Simple application and approval procedure: As the fixed deposit acts as 100% collateral, banks do not ask for salary slips, income tax returns or a previous credit score. This makes it suitable for students, homemakers, self-employed individuals, etc.
• Earn interest while using your credit card: Your pledged fixed deposit continues to earn interest rates from the bank, and you can simultaneously use the credit card for regular expenditure and rewards.
• Strengthen your credit profile: Each repayment and prompt bill repayment is reported to major Indian credit bureaus. When the card is used in a financially sound manner, it aslothis helps users build credit score and also recover from low scores.
• Regular credit card perks: Despite being secured, these cards operate like normal credit cards, offering access to online and offline shopping, cashback deals, reward points, etc.

How Can An FD-Backed Credit Card Help To Build Credit Score?

RepPayment history is one of the most crucial factors to determine your credit score. Consistent use of the FD-backed credit card, along with making timely payments, contributes to a positive repayment track record.

Factors such as low credit utilization ratio, timely payments and consistent use of the credit card can significantly contribute to your credit score. You can begin to see some level of improvement, though not instantly, within 12-18 months of usage. Eventually, this stable progression helps you move from a low or no credit score to a strong credit score, preferably above 750. This qualifies you for unsecured credit cards with enhanced benefits.

Hence, FD-backed credit cards offer certain benefits, including continuous interest earnings, control over unnecessary expenditure limits, and building your credit score. But using them wisely can be crucial to maintaining your overall financial health.