Regular Credit Card vs FD Credit Card: Which is the Right Choice for You?

Last Updated : Aug. 14, 2023, 1:45 p.m.

People often get confused and need clarification on a Regular Credit card vs FD Credit Card. Credit cards, mostly secured ones, are becoming famous gradually because they let you reap the rewards on daily expenses and assist you in building your credit profile. Credit cards against fixed deposits are identical to regular ones, but the primary difference is the deposit you make with the card issuer. The more premier the credit card is, the better advantages you will get. Want to know more about a Regular Credit Card vs FD Credit Card? Let’s learn the differences between the two credit cards.

Comparing the Credit Cards: The Merits and the Demerits

While browsing the available options in the credit card market, you may need clarification on which will work for you. Furthermore, the options may be baffling for individuals with fixed deposit accounts that have a substantial amount. However, putting more importance on the available credit card options is good before finalising one. Additionally, it may save you from the hassle and purchase of breaking an FD account.

Regular Credit Cards

Many credit card issuers prefer individuals with good credit scores, whereas others may show leniency. Understanding that these credit card issuers approve a pre-set limit is significant. When exhausted, you should repay the owed amount to continue using the card. You can use the credit cards for online and offline transactions. You may reap cashback or reward points with every spend. Before setting the limit, companies will evaluate your income, credit score , etc.

Merits

The pros of regular credit cards are as follows:

• Quick Access to Credit- It allows access to instant credit without worrying about immediate repayment because it functions on a deferred payment method.
• Paying EMIs- You can convert your big expenses into EMIs.
• Protection- It has extra protection, like insurance for card purchases.

Demerits

The cons of regular credit cards are as follows:

• Heavy Rate of Interest- Banks impose high-interest rates on outstanding amounts due to late payments.
• Hidden Charges- The fine prints contain hidden charges unknown to users.
• Minimum Outstanding Payments- It allows the payment of the minimum due amount while the interest accumulates on the outstanding amount and new expenses.
• Fraud- Unmonitored credit use will be rendered suspicious, and expenses will be unnoticed.

Credit Cards Against Fixed Deposits

Regardless of every investment and emergency corpus, you might have a financial crunch. In such cases, having an FD-backed credit card is advisable. Furthermore, like traditional credit cards, you can effortlessly opt for these credit cards without a stable income. Banks approve 75% to 85% of the FD for credit card use. Thus, the higher the deposit amount, the higher your chance of receiving a credit card against it.

Merits

The pros of credit cards against fixed deposits are as follows:

• Build Credit Score- On-time repayments and responsible credit utilisation help build credit scores.
• Effortless Application Process- The online and offline application process is easy.
• Continued Investment- It prevents you from breaking your fixed deposit account to access funds and use a secured credit card instead,
• No Debt Traps- If there is a default, credit card issuers can break the fixed deposit account and recover the dues.

Demerits

The cons of credit cards against fixed deposits are as follows:

• Low Credit Limit- The credit limit is low because banks approve a particular percentage of the amount deposited.
• Fewer Rewards and Perks- Unlike regular and traditional credit cards, it offers fewer perks in cashback, insurance on purchases, etc.
• Compulsory Fixed Deposit Minimum Amount- You should have a sufficient corpus to pay the minimum amount needed to begin an FD and opt for a secured credit card.

Which One Should You Opt for Regular or Fixed Deposit-Backed Credit Cards?

Which is better- A Regular Credit Card vs FD Credit Card? Selecting between an FD credit card and a regular credit card depends on your spending habits, purpose, and credit profile. You can opt for a fixed deposit-backed credit card to fix or rebuild your credit score, whereas regular credit cards are perfect if you are searching for good rewards and benefits. However, you should remember that defaults or late repayments will decrease your credit scores on both cards.

Conclusion

When deciding on a Regular Credit Card vs FD Credit Card, opting for a credit card that suits your needs is a good idea. Suppose you require a credit card with a high credit limit. In that case, you can opt for regular credit cards with high pre-set credit limits. If you are stable financially but require a credit card for payments, a credit card against a fixed deposit is a good choice. So, what’s better- a Regular Credit Card vs FD Credit Card? Both are good options. Analyse your financial condition before opting for one. Then why are you still waiting? Apply for a credit card and build a good credit score immediately.

Frequently Asked Questions (FAQs)