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FD Credit Card vs Regular Credit Card: Key Differences
FD Credit Cards and regular Credit Cards allow you to make purchases and pay later but understanding the key differences is important to choose the right one.
Synopsis
An FD Credit Card is secured and issued against your Fixed Deposit, while a regular Credit Card is issued based on your income and credit history.
Due to the difference in the level of risk and responsibility, FD Credit Cards and regular Credit Cards have different eligibility criteria.
Each of these Credit Card types can have different credit limits, interest rates, and other fees.
Understanding their benefits and limitations will be helpful in choosing a Credit Card.
Overview
Credit Cards are issued by banks to let you make purchases at any time and pay for them later. While the basic idea remains the same, FD-backed Credit Cards and normal Credit Cards have many features that set them apart from each other. When choosing one, you must consider the differences between an FD Credit Card vs regular Credit Card before you apply.
What is FD Credit Card?
An FD Credit Card refers to a secured Credit Card, which is issued against your Fixed Deposit. The funds in your FD account act as the collateral that helps you secure the card. You may be required to make a minimum deposit, and the card limit can be 75% to 90% of your FD amount. With an FD Credit Card, you can earn interest on your FD while enjoying the card benefits.
What is Regular Credit Card?
Unlike FD Credit Cards, regular Credit Cards are unsecured. You can use the card to make purchases on credit up to the limit set by the bank. Each month, you may get a Credit Card statement that details your spending. You are expected to pay the amount due within a specific period. Since they are riskier, the eligibility criteria for regular Credit Cards require the card holder to be creditworthy.
Key Differences Between FD Credit Card and Regular Credit Card
The key difference between FD Credit Card and regular Credit Card is that the former is secured while the latter is not. But the differences don’t end there. The eligibility, documentation, credit limit, fees, and interest rates are also different. The comparison tables below may help you understand the key differences.
Eligibility and Documentation
| Factor | FD Credit Card | Regular Credit Card |
|---|---|---|
| Collateral | Must hold or open a Fixed Deposit, with a minimum deposit, usually starts from ₹11,000* and may go beyond | No collateral |
| Citizenship | Indian citizen, residing in India | Resident/Non-Resident Indian |
| Age | Between 18 and 75 years of age | May vary, but typically between 21 and 65 |
| Income | No specific requirement | Can vary across banks and type of card |
| CIBIL score | No specific requirement | Ideally 750+ |
| Approval | Near-guaranteed approval | Determined by your creditworthiness |
| Documentation | May include identity and address proofs and FD details | May include identity and address proofs, income proof, employment details, business proof, and other documents as required by the bank |
Credit Limit, Fees and Interest Rates
| Factor | FD Credit Card | Regular Credit Card |
|---|---|---|
| Credit limit | 75% to 90% of FD amount | Determined by income, credit score, and credit history |
| Interest rates | Depends on prevailing interest rate and FD tenure | Depending on card type, can be between 1.99% and 3.6% per month. |
| Fees | Usually no fees, however premature withdrawal may lead to penalty | Can include joining fee, annual/renewal fee, cash advance fee, late payment fee, finance charges, or foreign transaction fee. |
Benefits and Limitations of Each Card Type
An FD Credit Card is more likely to be approved and because you FD acts as collateral, it can be easier to repay. This helps build a good credit score, making it ideal for beginners. You can continue earning interest on your FD amount. However, your credit limit depends on the deposit amount, which cannot be withdrawn.
A regular Credit Card does not require collateral, and you may also earn rewards and cashback when using it. The credit limit may be more flexible. However, being approved for the card depends on your income, credit score, and credit history. Missed or late payments may impact your credit score and can lead to late fees.
Conclusion
While both Credit Card types have the same function, it is important to understand the major differences. Knowing how an FD Credit Card and a regular Credit Card affect your finances differently will help make an informed decision.
*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Credit Card approvals at the sole discretion of HDFC Bank Limited. Credit Card approvals is subject to documentation and verification as per Bank's requirement. Interest rates are subject to change. Please check with your RM or closest bank branch for current interest rates.
Frequently Asked Questions
An FD Credit Card is issued against your Fixed Deposit, which becomes the collateral. A regular Credit Card, on the other hand, does not require collateral and is issued based on your creditworthiness.
Yes. An FD Credit Card can help build your credit score because they are secured with your FD acting as collateral. Your repayment activity is sent to credit bureaus, and timely repayments can improve your credit score.
No. The interest rates of FD Credit Cards are generally not higher than those of regular Credit Cards. Interest rates usually depend on the card type and its terms.
Beginners like students or young adults and those looking to improve their credit score may choose an FD Credit Card.
FD-backed Credit Card does not affect your credit score differently from a regular Credit Card. Your credit score is influenced by timely repayments and credit utilisation for both card types.
