Create Credit Score Like This With The Help Of Secured Credit Card

Having a good credit score not only gives you many loan options but you can also negotiate with banks and NBFCs to get a loan on better terms. However, those who do not have a credit score or have a poor credit score may find it difficult to get a loan or credit card. Such people should first focus on creating or improving their credit score so that their loan/card approval eligibility increases. He can get loan or card on better terms. Secured credit cards can be a good option for this, which will help them build a strong credit profile.

A secured credit card is given in exchange for a security or collateral, which is usually a fixed deposit (FD). To get a credit card in lieu of FD, the applicant first has to deposit the FD. It acts as an FD security, reducing the risk of the card issuer and giving the user a good opportunity to improve their score. If the user fails to pay the credit card bill in future then the bank has the right to compensate for his loss with the FD money.

What is the limit of secured card?

The limit of a secured credit card depends on the amount deposited in the FD. Some issuers offer a limit of up to 80-90% of the FD amount. While some offer credit limits equal to the full FD amount.

Benefits available on secured credit cards

Apart from the deposit requirement, a secured credit card works just like an unsecured credit card. With this, you can make both online and offline purchases, convert large expenses into EMI and get cashback or reward points on expenses.

Talking about annual fees, most of the secured credit cards have low or zero annual fees. Also, these cards come with basic rewards and cashback but some cards also offer good reward points on selected categories. For example, IDFC FIRST WOW Credit Card offers 3 X Reward Points at UPI expense and Kotak 811 Dream Different Credit Card offers 2 X Rewards at Online expense. You can get the most out of a secured card by using these value back programs properly. However, don’t spend more than necessary just to get rewards.

One specialty of a secured credit card is that you not only get a credit card in exchange for an FD but also keep getting interest on the FD. These interest rates may vary depending on the tenure of the bank and the FD. Like- IDFC FIRST WOW can get 6.25% per annum interest on FD despite being Credit Card.

Improve credit score with secured card

With a secured credit card, you can start building a credit score or improving the score. Because information about the activities of the card is given to the credit bureau and the bureau calculates and generates the user’s score only on the basis of this information. Therefore, pay the credit card bill in full on time. Spend only as much as you can pay the bill. Do not make full use of the credit limit and create a good repayment history. This will also help in improving credit score.

Benefits of secured credit card

Here are three major benefits of secured credit cards:

You can get the general benefits you get on credit cards like IMI conversion, 50-day interest free-period and reward points, etc.
Can receive interest on your deposits
Using intelligently, can score or improve.

However, different options should be compared while choosing a secured credit card. And one should choose such an offer which gives more interest on FD and also provides more benefits on credit card.

If you manage a secured credit card well, you may also be offered an unsecured credit card by the bank and card issuer. Which usually come with higher credit limits and better benefits. Having a better credit score and responsible credit history can make you eligible for unsecured credit cards that are more consistent with your spending habits and can save well on your regular expenses.

Many times card issuers offer you updated credit cards based on your spending habits. However if you are not being offered an updated card no problem, after using the secured credit card responsibly for 6 months you can apply for the unsecured card by yourself. By adopting a secured credit card in this way, you can make the path to getting an unsecured credit card easier. And may open the door to other credit opportunities in the future.

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