Credit cards are an indispensable part of life, these days. Thanks to them, no one carries a huge wad of currency in their pockets. No matter the amount, a credit card pays all bills, be it utility, shopping or phone. There are two types of cards - normal and secured. Normal credit cards are a type of unsecured loans available to credit card users, since they are unprotected by collateral. On the other hand, a secured credit cards is provided against an asset, namely fixed deposit or any other savings. In case of non-payment, this asset can be forfeited to the lender
A secured credit card comes with a cash collateral deposit that becomes the credit line for that account. One of the most important criteria of a secured credit card is that it is issued only against a fixed deposit with any bank of financial institution. Secured credit card is offered to an individual who is unable to obtain a normal card and has a fixed deposit account with that specific bank. Such cards are secured since the bank has the right to liquidate the fixed deposit account to recover debts, in case there is a default on payments. The cardholder cannot close the fixed deposit account till the secured card is in his possession. Generally a bank offers a maximum cap of 85% against the fixed deposit. Such cards work similar to the normal credit card and interest can also be earned on the fixed deposit. Apart from the fixed quotient, such a card works exactly like a normal credit card and you continue earning interest on the fixed deposit.
Currently in India, certain private sector banks such as Axis Bank, Kotak Mahindra Bank, ICICI Bank, and a few public sector banks namely State Bank of India (SBI), Syndicate Bank, Central bank of India, provide the option to avail secured credit cards against fixed deposit accounts. Generally, banks provide credit cards with a cap of anywhere between 80-100% of the actual value of the fixed deposit.
A secure credit card can be availed by individuals who:
There are a number of benefits of availing a secured credit card, apart from the fact that it can be used as any other normal credit card. A few of them have been mentioned below:
It is always essential to take proper care while opting for a secured credit card. Here are some things that the applicant should remember:
A secured credit card availed against a fixed deposit has a credit limit of 80% of amount in the fixed deposit. Once the card is opted for, the amount in the fixed deposit will act as a loan till the card is handed over to bank.
The interest rate on this card will be lower than what is offered on regular credit cards. The bank meanwhile can recover unpaid credit by dissolving your fixed deposit. This offers a win-win situation for both the borrower and the lender.
Cards are issued with minimum requirements for the customers. In general, if a bank offers this product, you can easily avail a credit card without the associated credit checks such as credit score, repayment history, defaults in the past etc. – issues that inhibit easy dispersal of credit cards to customers.
The proposal by the Reserve Bank of India (RBI) to limit online fraud has made online transactions more transparent. The central bank had floated proposal by which banks are to notify customers of each transaction and send alerts for unauthorised transactions via SMS.
RBI is now in the process of finalising the proposal, which will make to mandatory to link customer’s bank accounts to a mobile number. Alerts of all online transactions would be sent via SMS to the registered mobile number.
Customers will also not be held liable for fraudulent transactions as a result of negligence or contributory fraud by the bank.
Losses caused as a result of a third party will be borne by the customer if the fraud is not reported within 4-7 days of receipt of the alert from the bank.
10th July 2017