Secured credit cards: All you need to know

With more than 50% of the Indian population under the age of 30, you can expect that several credit card applicants are first-timers. Many of these youths are yet to start earning or may have just started doing so. Understandably, they wouldn’t have much credit history yet. 

Credit score and income are two of the major criteria for getting a credit card. So, you might wonder how first-timers can get a credit card application approved! This is where secured credit cards come to the rescue. 

Let's explore more about secured credit cards in India right here! 

What is a secured credit card?

Secured credit cards are a category of credit cards where the card applicant furnishes an upfront deposit as collateral for the card, usually a fixed deposit (FD). The value of the fixed deposit acts as the credit limit. 

Apart from people with no or low income, people with poor credit scores or someone trying to rebuild their credit score can also apply for secured credit cards. 

How do secured credit cards work? 
 

To understand how secured credit cards, work, let us look at few offerings by IDFC FIRST Bank in this category. 

The FIRST WOW! Credit Card is an example of a secured credit card. For existing customers, you must open an FD account with IDFC FIRST Bank in 're-invest and auto-renewal' mode, for a minimum of Rs 2,000. For all other customers, you can open an FD account with IDFC FIRST Bank for a minimum amount of Rs 5000.

Benefits of secured credit cards
 

Secured credit cards tick some unique boxes that includes -

· It helps customers to build their credit history and improve low credit scores 

· It acts as an alternative to loans against deposits

· Unlike a loan against deposits, interest costs in secured credit cards arise only if you default on repayment

· Credit card issuers bear a lower risk with secured credit cards as the credit limit is covered by the deposit amount

Factors to consider when choosing a secured credit card

While choosing a secured credit card consider these factors -

· The cost involved, namely the joining fee, annual fee, charges and interest on cash withdrawal, interest rate, etc.

· Balance the credit limit and the fixed deposit. In a bid to get a higher credit limit, don’t block a sum you cannot afford as deposits

· Secured credit cards are relaxed about income and credit history

· To ensure that your secured credit card application is approved, you must meet the bank’s eligibility criteria

Responsible usage of secured credit cards

While using a secured credit card, you must -

· Pay the credit card dues on time

· Pay your other bills and loans on time

· Utilise a maximum of 70 - 80% of the credit limit to keep your credit score intact

· Regularly monitor your credit score and track the progress made

Costs and fees associated with secured credit cards

Some of the common fees charged by secured credit card issuers are -

Interest on outstanding balance 
 

Some issuers charge more than 40% p.a. With FIRST WOW! Credit Card, interest can be as low as 0.75% per month. You can avoid it by paying your credit cards outstanding amount on or before the due date.

Other fees

This may include joining fees, annual fees, forex conversion fees, etc. None of these charges are levied on the FIRST WOW! Credit Card. Your card is free for life

Graduating from a secured credit card

While secured credit cards are a good start for first-time card users, you may wish to move on to an unsecured credit card at some point. 

· Your card issuer may periodically review your account to evaluate if you are eligible for an unsecured credit card  

· You can call your card issuer to find out if you are eligible for an unsecured credit card

· You can also check your unsecured credit card eligibility independently and apply for it. Once approved, you can close your secured credit card

Conclusion

Whether you are a housewife, first jobber, traveller, self-employed, or a senior citizen, with a FIRST WOW! Credit Card, you can enjoy 4X rewards, merchant discounts, zero forex markup and many more stellar features. Reap the benefits of a secured credit card by applying for the FIRST WOW! Credit Card today! 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.