Struggling with bad credit score? Take credit card against collateral

The word ‘Credit Card’ represents convenience as this plastic money helps you enjoy shopping for clothes and tickets, make payment of utility bills, insurance premiums and many more. But so often people fall into the lure of credit card, start spending too much and end up defaulting on the payment of the bills. This ultimately lowers the credit score and makes them virtually ineligible for loans that they may require in the future. But there is a solution to this problem, and that is secured credit card. Have you ever heard about secured credit cards? I suppose, most of you would not have. A secured credit card is issued by the banks against collateral such as fixed deposits. The credit limit of the card is dependent on the amount of collateral submitted to a bank. Suppose if you have opened a fixed deposit of say Rs 1,50,000, you can get a secured credit card with a limit of 50%-100% of the deposit amount. For banks, the risks get minimised with secured credit cards as they deduct the late payment fees, minimum amount due and interest charges from your fixed deposit account in case you default on the payment of your bills. On the other hand, you can also improve your CIBIL score if you use them judiciously.

Benefits of secured credit card

  • Most secured credit cards do not bear processing fee or annual charges, as well as offer interest-free cash withdrawal, which you can’t get in a normal credit card that bears interest charge of 24%-48% per annum along with the transaction fee.
  • If you wriggling with a poor credit history but have fixed deposit, then apply for secured credit cards and give your CIBIL score a big push by spending judiciously and make repayments on time.
  • The fact that you can spend on the card in proportion to the collateral amount makes it virtually impossible for you to fall into the debt trap.
  • You can also earn interest on your fixed deposit account and earn reward points on purchase from such cards.
  • One can apply for add-on card against the secured credit card. This allows you to give your family members a reason to smile as any of them can get that card.
  • Like normal credit card, you can also enjoy fuel surcharge waiver when you use secured credit cards at petrol pumps.
  • No need to produce address and identity proofs
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Things to keep in mind

  • You need to strike a deal to make sure your fixed deposit earns the interest
  • Make sure the lender reports your details to CIBIL so that your credit score can enhance, which remains the primary objective of the secured credit card.
  • Try to find a lender that does not or charge lesser processing fee, annual fee, etc.

Banks offering secured credit card with poor credit history

  • Axis Bank Insta Easy Credit Card-Requires a minimum and maximum fixed deposit of Rs 25,000 and Rs 25,00,000, respectively
  • SBI Dena Bank Secured Card- You need to have a fixed deposit of a minimum value of Rs 30,000 at Dena Bank to avail the card.

Personal Loan Interest Rates December 2018
Bajaj Finserv10.99% - 16.00%
Fullerton India14.00% - 33.00%
HDFC Bank11.25% - 21.50%
ICICI Bank10.99% - 18.40%
IndusInd Bank10.99% - 16.00%
Kotak Bank10.99% - 20.99%
RBL13.00% - 18.00%
Standard Chartered Bank12.00% - 17.00%
Tata Capital10.99% - 18.00%
Home Loan Interest Rates December 2018
State Bank of India/SBI8.75% - 9.35%
HDFC8.80% - 9.70%
Bank of Baroda8.65% - 9.65%
LIC Housing8.85% - 9.05%
PNB Housing Finance9.00% - 13.00%
ICICI Bank9.10% - 9.35%
Axis Bank8.85% - 9.10%
Citibank9.00% - 9.85%
Indiabulls Housing Finance Limited8.80% - 11.05%
Kotak Bank8.90% - 8.75%
DHFL9.05% - 9.95%
Reliance Home Finance8.75% - 14.00%