Demystifying Credit Cards Against Fixed Deposits

Demystifying Credit Cards Against Fixed Deposits
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Credit Cards Against Fixed Deposits, often referred to as FD Credit Cards, can provide a gateway to credit accessibility and financial convenience. In this article, we’ll demystify FD Credit Cards. We’ll delve into Kotak Credit Card eligibility for this type of card.

Understanding FD Credit Cards:

These cards are secured by a fixed deposit, which means that the credit limit is determined by the amount of money deposited in the linked fixed deposit account. Here’s how they work:

Security with Fixed Deposit: To obtain an FD Credit Card, you need to open a fixed deposit account with the issuing bank. The amount you deposit in this account serves as collateral for the credit card. If you cannot repay your credit card dues, the bank can recover the outstanding balance from the fixed deposit.

Building Credit History: One of the primary purposes of FD Credit Cards is to help individuals establish or rebuild their credit histories. Responsible use of these cards, including timely payments, can positively impact your credit score over time.

No Income Proof: Unlike traditional credit cards, FD Credit Cards often do not require proof of income. It makes them accessible to individuals who may not have a regular income source.

Credit Limit: The credit limit on an FD Credit Card is typically a percentage (usually up to 85%) of the fixed deposit amount. For example, if you deposit Rs. 50,000 in an FD, your credit limit may be Rs. 42,500 or lower, depending on the bank’s policy.

Credit Card Eligibility for FD Credit Cards:

  • Fixed Deposit with Kotak: To apply for an FD Credit Card from Kotak Mahindra Bank, you typically need to have a fixed deposit account with the bank. The amount you hold in this fixed deposit will determine your credit limit.
  • Age Requirements: The bank generally requires applicants to be at least 21 years old to apply for an FD Credit Card.
  • Credit History: While FD Credit Cards are designed for individuals with limited or no credit history, having a favourable credit history with Kotak Mahindra Bank can potentially influence your eligibility and credit limit.
  • Other Criteria: Kotak’s credit policies and eligibility criteria can change over time. It’s crucial to check the latest requirements before applying for an FD Credit Card to ensure you meet all conditions.
  • Fixed Deposit Type: Different types of fixed deposits, such as regular fixed deposits and tax-saving fixed deposits, may have varying impacts on your eligibility and credit limit. Be sure to inquire with the bank regarding the specific terms of your fixed deposit.

How to Apply for a Credit Card Against Fixed Deposit:

If you meet the eligibility criteria and wish to apply for a Credit Card against a fixed deposit, follow these steps:

  • Open a Fixed Deposit Account: If you don’t already have one, visit a Bank branch or their official website to open a fixed deposit account. The amount you deposit will serve as collateral for your credit card.
  • Select the Right Card: Kotak 811 offers credit cards, each with its unique features and benefits. Choose the one that aligns with your financial needs and spending habits.
  • Apply for the Credit Card: You can typically apply for an FD Credit Card online through the bank’s website or by visiting a local branch. Fill out the application form, provide the required documents, and submit your application.
  • Approval and Credit Limit: Once your application is approved, Kotak Mahindra Bank will determine your credit limit based on your fixed deposit amount and other relevant factors. This limit will be communicated to you.
  • Receive and Activate Your Card: After approval, you’ll receive your credit card. Activate it following the bank’s instructions, and you can use it for your financial needs.

Using Your FD Credit Card Wisely:

Pay Your Bills on Time: Timely payments are crucial to maintaining a good credit history. Pay at least the minimum amount due by the due date to avoid late fees and interest charges.

Stay Within Your Credit Limit: Ensure your credit card spending does not exceed your credit limit. Over-limit transactions can lead to over-limit fees and negative impacts on your credit score.

Avoid Carrying a Balance: To minimise interest charges, aim to pay the full outstanding balance on your credit card each month.

By understanding the eligibility criteria, opening a fixed deposit account, and using the card responsibly, you can access credit and achieve your financial goals while building a strong credit history.

Read: Making Financial Choices: Kotak Mahindra Bank Credit Card Application