If you have a stable monthly income, an ideal debt-to-income ratio, decent credit history and the associated credit score, then you have a fair chance of getting a credit card without any hassle. In fact, the card issuers will be behind you to provide you with a credit card.
What if you’re in a contrasting scenario – you don’t have stable income, no/poor credit history or credit score or high on debit, etc. No issuer would come forward to offer you any credit card or a loan.
In both the cases, if we say that you can get a credit card, would you believe it? Of course, you should, and we will tell you how.
If you’re in the first scenario, with a clean financial record, you would be offered an unsecured credit card. Unfortunately, if you’re in the second situation, you will still be offered a credit card, a secured one though that comes with some strings attached.
Let’s dig a little further to know the difference between secured and unsecured credit cards, how they work, and other things to consider while applying for one.
As mentioned earlier, a secured credit card is designed to cater the group of people who frequently faces a rejection whenever they apply for a credit card. The reason could be lack of income or income proof, poor or no credit history/score, or any other.
A secured credit card, as the name implies, is a credit card issued on some collateral. Just like a secured loan, you need to produce some security to the card issuer to issue the card.
Banks and credit card issuers typically offer secured credit cards against a fixed deposit with them.
Open a fixed deposit and your secured credit card will be issued almost instantly. The banks usually fix a minimum amount that needs to be deposited in the FD account to avail the credit card.
You can get a secured credit card on a minimum deposit amount of Rs.10,000 also.
Secured credit cards work similar to any other credit cards. However, there are a few limitations in terms of credit card limit and other things.
The credit limit on secured credit cards is typically 75% to 85% of the FD amount. This means if you have a fixed deposit of Rs.1 lakh, you might receive a credit card with the total credit limit of Rs.75,000 to Rs.85,000. Thus, the higher your FD amount is, the higher would be the credit limit on your secured credit card.
Another reason why banks provide secured credit cards against FD is that they can consider the FD as a security deposit. In case, the cardholder defaults on the payments, the bank or the card issuer reserves all the rights to break the FD and utilise the funds to clear the pending dues on the card.
As we have discussed enough about secured credit cards let’s see how they differ from unsecured credit cards.
Well, secured and unsecured credit cards are two different credit cards designed to cater different set of customers.
While the regular customers serve the needs of eligible credit card applicants, the unsecured cards are for those who often don’t qualify for a regular or unsecured credit card.
Hence, while making a choice between both the cards, one must consider his own requirement and eligibility factors rather than anything else.
If you have a clean credit record and a good credit score, then there is no point to put some amount in a fixed deposit and then to get a credit card.
Similarly, if your credit history is in bad condition or if you’re availing a credit facility for the first time, it’s ideal to go for a secured credit card as it allows you to build or re-build your credit history while enjoying the credit card facilities.
Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.