# FD Credit Card: Complete Guide to Credit Cards Against Fixed Deposit
An FD credit card is a secured credit card issued against a fixed deposit. It is useful for people who are new to credit, have a low or limited credit score, do not have regular income proof, or want to build a credit history with relatively easy approval. The bank keeps a lien on the fixed deposit as security while the deposit generally continues to earn interest. [jupiter](https://jupiter.money/blog/credit-cards-against-fd/)
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## What Is an FD Credit Card?
An FD credit card, also called a **credit card against fixed deposit**, is issued after you open or pledge a fixed deposit with a bank or financial institution.
Unlike a regular credit card, which is approved mainly on the basis of your income, employment and credit score, an FD-backed credit card is secured by your fixed deposit. If you fail to repay the card dues, the issuer may recover the outstanding amount from the pledged FD, according to the terms and conditions of the card.
### Simple example
Suppose you open a fixed deposit of ₹50,000 and the bank offers a credit limit equal to 80% of the FD value:
- Fixed deposit: ₹50,000.
- Credit limit: ₹40,000.
- FD interest: Continues according to the applicable FD rate.
- Security: The bank places a lien on the FD.
- Repayment: You must pay the credit card bill every month.
The exact credit limit, minimum FD amount, interest rate, annual fee and eligibility requirements vary between issuers.
## How Does an FD Credit Card Work?
The process usually works as follows:
1. You open a fixed deposit with the card-issuing bank.
2. The bank places a lien on the FD, meaning you may not be able to withdraw or close it freely while it is being used as security.
3. The bank issues a credit card against the deposit.
4. Your credit limit is fixed as a percentage of the FD amount, commonly around 70% to 90%, although some products may offer different limits. [jupiter](https://jupiter.money/blog/credit-cards-against-fd/)
5. You use the card for purchases, online payments, bills and other permitted transactions.
6. You receive a monthly statement showing your total amount due, minimum amount due and payment due date.
7. You repay the bill on time. Your FD normally remains invested and continues to earn interest.
8. If you default, the bank may use the FD to recover the dues, depending on the agreement.
An FD credit card is not the same as withdrawing money from your fixed deposit. The FD acts as collateral, while the card provides a separate revolving credit facility.
## Features of an FD Credit Card
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The common features include:
- Secured against a fixed deposit.
- Easier approval than many unsecured credit cards.
- Usually available to new-to-credit customers.
- Credit limit linked to the FD value.
- FD may continue earning interest.
- May require limited or no income documentation, depending on the issuer.
- Can help establish a credit history.
- Accepted at merchants and online platforms wherever the card network is supported.
- May offer rewards, cashback, discounts or milestone benefits.
- Some cards may have no annual fee, while others may charge a joining or renewal fee.
However, benefits differ significantly. Many FD cards are designed primarily for credit-building and may offer fewer rewards and premium benefits than high-end unsecured cards.
## Eligibility for an FD Credit Card
Typical eligibility requirements may include:
- You must usually be an Indian resident.
- You must generally be at least 18 years old.
- You must open an eligible FD with the issuing bank.
- The FD may need to remain active for a specified period, often several months.
- The deposit should not already be pledged against another loan or facility.
- You must complete KYC verification.
- You may need an Indian mobile number, PAN and a valid identity or address document.
Some banks allow students, homemakers, freelancers, self-employed individuals and people with limited income proof to apply. Approval is not automatically guaranteed because the issuer may still conduct KYC, fraud, risk and regulatory checks.
## Minimum FD Amount and Credit Limit
The minimum FD required depends on the card issuer. Some products begin with a relatively small deposit, while others require a larger amount.
The credit limit is generally calculated using a percentage of the FD:
\[
\text{Credit Limit} = \text{FD Amount} \times \text{Applicable Percentage}
\]
### Example
If your FD is ₹1,00,000 and the bank offers 85% of the deposit as the credit limit:
\[
₹1,00,000 \times 85\% = ₹85,000
\]
Therefore, your available credit limit may be ₹85,000.
The limit may not increase automatically when the FD earns interest. You should check the issuer’s policy before assuming that accrued FD interest will increase your card limit.
## Benefits of an FD Credit Card
### 1. Easier approval
Because the FD provides security, the bank’s risk is lower than with an unsecured card. This can make the product more accessible to people with a thin, new or weak credit profile.
### 2. Helps build a credit score
When you use the card and repay your bills on time, the account’s repayment history may be reported to credit information companies. Consistent payments can help you establish a positive credit profile over time. CIBIL advises paying the full bill on or before the due date and keeping credit utilisation under control. [cibil](https://www.cibil.com/blog/six-ways-you-can-use-credit-card-for-optimum-credit-score)
### 3. No need to break the FD for regular spending
The FD remains invested while you use the card. This allows you to keep earning FD interest while accessing a separate credit line.
### 4. Useful for first-time credit users
Students, young professionals and people who have never taken a loan or credit card may use an FD card as an entry point into the formal credit system.
### 5. May be available with limited income proof
Depending on the issuer, approval may focus more on the FD and KYC documents than on salary slips or income-tax returns.
### 6. May provide card-related benefits
Some FD cards offer:
- Reward points.
- Cashback.
- Fuel-related benefits.
- Online shopping offers.
- Utility payment rewards.
- Contactless payments.
- Domestic or international usage.
- EMI conversion facilities.
Always compare the rewards with the annual fee and other charges. A card with attractive rewards may not necessarily be the most economical option.
### 7. FD may continue earning interest
The deposit generally remains active and earns interest according to the FD contract. The interest earned on the FD is separate from the interest or finance charges applicable to unpaid credit card dues.
## Disadvantages and Risks
### 1. Your money becomes less liquid
Because the FD is pledged, you may not be able to withdraw, prematurely close or freely use it while the card is active. This can be inconvenient during an emergency.
### 2. The FD can be used to recover unpaid dues
If you repeatedly fail to pay your bills, the card issuer may invoke its security rights and recover the outstanding amount from the FD. This can reduce or eliminate your savings.
### 3. Interest on unpaid card dues can be high
Paying only the minimum amount due does not make the borrowing free. If you do not clear the total amount due by the due date, you may lose the interest-free period and interest may be charged on the outstanding amount. RBI guidelines also state that late-payment charges should be applied only to the outstanding amount after the due date, not to the total credit limit or unrelated amounts. [rbi.org](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12956)
### 4. Rewards may be limited
Many FD-backed cards offer basic benefits rather than premium rewards, airport lounge access or extensive travel privileges.
### 5. Fees may reduce the value
Possible charges include:
- Joining fee.
- Annual or renewal fee.
- Cash-advance fee.
- Foreign transaction fee.
- Late-payment fee.
- Over-limit fee.
- Card replacement fee.
- EMI processing fee.
- GST on applicable charges.
Read the schedule of charges before applying.
### 6. A secured card can still damage your credit score
The FD protects the bank, but it does not protect your credit record from poor repayment behaviour. Missed payments, high utilisation and frequent applications can negatively affect your credit profile.
### 7. The FD may not be sufficient in every situation
If your outstanding dues, interest and applicable charges exceed the amount recoverable from the FD, you may still be responsible for the remaining balance.
## FD Credit Card vs Regular Credit Card
| Feature | FD Credit Card | Regular Credit Card |
|---|---|---|
| Security | Backed by a fixed deposit | Usually no collateral |
| Approval | Generally easier for eligible applicants | Depends on income, credit score and issuer policy |
| Income proof | May be limited or not required in some cases | Commonly required |
| Credit limit | Linked to the FD value | Based on income, credit profile and internal policy |
| Liquidity | FD is blocked or lien-marked | No FD is locked |
| Credit-building potential | Yes, with timely payments | Yes, with timely payments |
| Rewards | Often basic to moderate | Can range from basic to premium |
| Risk of losing savings | Possible if the bank invokes the lien after default | No pledged FD, though unpaid debt still creates serious consequences |
| Suitable for | New-to-credit users and applicants with weak credit history | Customers with stable income and strong credit profiles |
An FD credit card is generally more suitable when approval and credit-building are the main priorities. A regular card may be better when you qualify for stronger rewards, higher limits and premium features without pledging savings.
## How to Apply for an FD Credit Card
The exact process differs by issuer, but the typical steps are:
### Step 1: Compare available cards
Check:
- Minimum FD amount.
- Credit-limit percentage.
- Annual and joining fees.
- FD tenure.
- Interest rate on unpaid dues.
- Rewards and cashback.
- Domestic and international usage.
- Withdrawal and closure rules.
- Whether the FD must be opened with the same bank.
### Step 2: Open an FD
If you do not already have an eligible FD, create one with the bank. Choose an amount that you can afford to keep locked for the required period.
### Step 3: Submit the card application
Apply through the bank’s website, mobile application, branch or authorised channel. Select the FD-backed card option where available.
### Step 4: Complete KYC
You may need documents such as:
- PAN card.
- Aadhaar or another approved identity document.
- Address proof.
- Photograph.
- Mobile number and email address.
- Bank account details, if requested.
### Step 5: Review the terms
Before accepting, check the card agreement, fees, interest rate, billing cycle, grace period, cash withdrawal charges and FD lien conditions.
### Step 6: Activate the card
After receiving the card, activate it through the approved method and set a secure PIN. Enable transaction alerts and payment reminders.
## Documents Generally Required
The documents vary by issuer, but applicants may be asked for:
- PAN card or Form 60, where applicable.
- Aadhaar, passport, driving licence or voter ID.
- Address proof.
- Recent photograph.
- Mobile number linked with KYC records.
- FD account details.
- Additional income or employment documents, if required by the bank.
For an existing customer, the bank may already have some of these details, but it can still request updated KYC documents.
## How to Use an FD Credit Card Responsibly
### Pay the total amount due
Paying the full statement balance by the due date is the safest way to avoid finance charges. Paying only the minimum due keeps the account active but can allow the balance to grow.
### Keep utilisation low
Credit utilisation is the percentage of your available limit that you use. For example, if your limit is ₹50,000 and your outstanding balance is ₹15,000:
\[
\text{Utilisation} = \frac{₹15,000}{₹50,000} \times 100 = 30\%
\]
CIBIL describes keeping overall utilisation around 30% as a healthy practice, although the ideal ratio can vary by individual circumstances. [cibil](https://www.cibil.com/blog/six-ways-you-can-use-credit-card-for-optimum-credit-score)
### Set up automatic payments
Use auto-pay for at least the total amount due, if your bank supports it. Also maintain enough money in the linked account to avoid payment failure.
### Do not treat the card as additional income
Use the card only for purchases that you could afford to pay for from your current income or savings.
### Avoid unnecessary cash withdrawals
Cash advances often attract separate fees and may begin accruing interest immediately. Use this facility only for genuine emergencies.
### Monitor the statement
Check every statement for:
- Unrecognised transactions.
- Incorrect fees.
- Refunds and reversals.
- EMI conversions.
- Payment credits.
- The total amount due.
- The payment due date.
### Review your credit report
After using the card regularly, check whether the account and repayment history are being reported correctly to the credit bureau.
## What Happens If You Miss a Payment?
If you miss the due date, several consequences are possible:
- Late-payment charges.
- Finance charges or interest.
- Loss of the interest-free period.
- Negative impact on your credit history.
- Restrictions on the card.
- Recovery of dues from the pledged FD, subject to the agreement.
- Additional liability if the outstanding amount exceeds the recoverable FD value.
RBI rules state that an account may be reported as past due or penal charges may be levied only when it remains past due for more than three days, and charges must be calculated according to the applicable rules. This does not mean that delaying payment is safe; cardholders should still pay by the due date shown on the statement. [rbi.org](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12956)
## Can You Withdraw the FD After Getting the Card?
Usually, the FD remains lien-marked while it secures the credit card. You may not be able to withdraw or close it independently.
If you want to release the FD, you may need to:
1. Pay all outstanding card dues.
2. Close or surrender the credit card, depending on the issuer’s policy.
3. Request removal of the lien.
4. Complete the bank’s closure and settlement process.
The FD may also be renewed automatically if you do not provide maturity instructions. Confirm the process and maturity rules with the issuer.
## Tax Treatment of FD Interest
Interest earned on a fixed deposit is generally taxable according to the applicable income-tax rules. The credit card does not normally change the tax nature of the FD interest.
The bank may deduct tax at source when the applicable conditions and thresholds are met. Since tax rules and thresholds can change, check the latest official income-tax guidance or consult a tax professional for your specific situation.
## Is an FD Credit Card Safe?
An FD credit card can be relatively safe when used carefully because the bank has collateral and your deposit continues to exist. However, it is not risk-free.
The main risks are:
- Locking money that you may need in an emergency.
- Paying high interest on unpaid balances.
- Losing part of the FD after default.
- Misunderstanding fees or renewal terms.
- Assuming that an FD-backed card cannot affect your credit score.
The safest approach is to maintain an emergency fund separately and avoid using the entire credit limit.
## Who Should Consider an FD Credit Card?
An FD credit card may be suitable for:
- First-time credit users.
- Students and young adults.
- People with no credit history.
- Individuals rebuilding their credit.
- Applicants whose regular card applications were rejected.
- Self-employed or freelance workers with irregular income documentation.
- People who want a modest credit limit for controlled spending.
It may not be suitable for someone who needs immediate access to the FD money, cannot repay bills regularly, or already has high-interest debt.
## Tips for Choosing the Right FD Credit Card
Before applying, compare these factors:
1. **Security percentage:** Find out what percentage of the FD becomes your credit limit.
2. **Minimum FD amount:** A smaller minimum deposit may be more accessible.
3. **Annual fee:** Check whether the fee is waived at a particular spending level.
4. **FD interest rate:** Compare the deposit return with other suitable FD options.
5. **Card interest rate:** Understand the cost if you carry a balance.
6. **Rewards:** Check reward exclusions for fuel, rent, wallet loading, insurance and utility payments.
7. **Foreign transaction fee:** Important if you make international payments.
8. **ATM charges:** Review cash withdrawal fees and interest rules.
9. **Lien and closure terms:** Understand how to release the FD.
10. **Credit-bureau reporting:** Confirm that the issuer reports repayment activity to credit information companies.
11. **Customer service:** Check how disputes, fraud and card closure are handled.
12. **FD maturity rules:** Verify whether the deposit renews automatically.
Do not choose a card solely because it promises easy approval. The total cost and the terms of the FD are equally important.
## Common Myths About FD Credit Cards
### Myth 1: An FD card is a debit card
False. It is a credit card. Purchases are billed later, and you must repay them by the due date.
### Myth 2: The bank immediately deducts every purchase from the FD
Usually false. The FD acts as collateral and normally remains invested. Recovery from the FD generally becomes relevant when the cardholder defaults, subject to the card agreement.
### Myth 3: You can never earn rewards on an FD card
False. Some FD cards offer rewards, cashback or discounts, although the benefits may be more limited than those on premium unsecured cards.
### Myth 4: Paying the minimum amount means there is no interest
False. The minimum payment may prevent the account from becoming immediately overdue, but interest can still apply to the remaining balance.
### Myth 5: An FD card guarantees a high credit score
False. The card can help create a positive credit history only when you use it responsibly and pay on time.
## Frequently Asked Questions
### Is an FD credit card the same as a secured credit card?
Yes. An FD-backed credit card is a type of secured credit card because the fixed deposit acts as collateral.
### Can I get an FD credit card with a low CIBIL score?
Many issuers consider applicants with limited or weak credit histories because the FD reduces the lender’s risk. However, approval still depends on the issuer’s eligibility, KYC and internal policies.
### Does the FD continue to earn interest?
Generally, yes. The FD usually remains active and earns interest according to its deposit terms, even though the bank has placed a lien on it.
### Can I increase my credit limit?
Some issuers may allow you to increase the limit by creating or pledging an additional FD. The available percentage and process depend on the issuer.
### Does an FD credit card improve CIBIL Score?
It can help if the issuer reports the account and you make timely payments while maintaining low utilisation. Late or missed payments can harm your credit profile.
### Can I use it for online shopping?
Yes, provided online transactions are enabled and the merchant accepts the card’s network.
### Can I use it internationally?
Some FD credit cards support international transactions. Check foreign transaction fees, currency conversion charges and international usage restrictions before travelling.
### What happens when the FD matures?
The bank may renew the FD, release it, or take another action according to your instructions and the card agreement. Contact the issuer before maturity to understand the procedure.
## Final Verdict
An FD credit card is a practical starting point for building credit without depending entirely on income proof or a strong credit history. It combines a secured credit facility with the potential to earn interest on a fixed deposit, but the FD becomes less liquid and may be used to recover unpaid dues.
Choose one only after comparing fees, credit-limit rules, interest charges, rewards, FD maturity conditions and lien-release procedures. Use a small portion of the limit, pay the total bill on time and treat the card as a payment tool—not as extra income.
