Articles
Fixed Deposit Rates - How good is Credit Card against Fixed Deposit?
by Anil Surma BankingWith the wider acceptance of Credit cards and the
convenience it offers, it sometimes become necessary to have credit cards. But
not everyone is eligible to have one and banks may deny credit card due to
reasons like poor credit score, no regular income, and low salary among many
others. Credit card against Fixed Deposit is a product which is specially made
for such people.
The product:
The banks ask the applicant to open a fixed deposit
account with auto renewal feature in the bank. The bank marks lien over this
fixed deposit and generally offers credit limit up to 85% of the FD amount. The
credit card works like normal credit cards while the FD continues to earn
interest. In case the customer defaults and does not pay his dues for 60/90
days, banks reserve the right to adjust the amount against the FD.
The FD amount can be
as low as Rs 20,000 and varies as per banks and the credit card type (Gold,
Platinum, etc) opted for. Also in most cases the tenure of the FD should not be
less than 180 days. Tax Saver FDs, Flexi-Deposits (Auto-sweep FDs), FDs in the
name of HUF/society/trust/companies do not qualify for credit cards.
What’s on offer?
Most big banks are offering Credit card against
Fixed Deposit in different names. We have listed features of some of the
offerings:
The table below compares the features of these
cards from different banks:
The Good part:
1.
You can get credit card which
you would not have in normal circumstances
2.
The processing for card is
quicker than regular card. Also the documentation required is lesser
3.
Regular spending and payment on
this card can help build/improve one’s credit score
4.
The fixed deposit continues to
earn regular interest while you enjoy interest free credit for 45-55 days
5.
Get all the reward points,
discounts valid for the card provider bank
Disadvantages:
1.
The fixed
deposit rates is not liquid. You cannot break
the FD until you have the card
2.
If you do not pay your dues till
60/90 days, the banks can adjust the balance against the FD
3.
Credit card is double edged
sword – while it offers convince, if not handled carefully can let you to
overspending resulting in debt trap.
4.
The interest on credit card
varies from 18% to 36% per annum. So in case of default be ready to pay hefty
interest along with other charges.
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About Anil Surma 
Banking
11 connections, 0 recommendations, 32 honor points.Joined APSense since, October 14th, 2015, From Mumbai, India.
Created on Dec 31st 1969 18:00. Viewed 0 times.
