What is a secured credit card and why is it essential for every Indian? Understand in 10 questions and answers..

Credit cards are essential for every ambitious Indian today. Even more important is having a secured credit card (Secured Credit Card Benefits), whether it's a student, a newcomer, or a housewife. In this article, Manish Agarwal, Head of Kotak 811, answers some of the most common questions, including why everyone needs a credit card and why not everyone gets one.

Life is difficult without a credit card these days. Online shopping, UPI payments, bill payments, and most importantly, building a good credit score are crucial. But the problem is that not everyone can easily obtain one.

Banks require salary slips, a good credit score, or a past loan history. Therefore, students, housewives, senior citizens, and first-time employers are often left out. This is where a secured credit card becomes a game-changer. Let's find out the answers to all these questions.

What is a secured credit card? How is it different from a regular card?
A secured card is available against your fixed deposit (FD). You make an FD with a bank, and the bank gives you a credit card up to 90% of that FD.

A regular card requires salary proof and a good score. A secured card doesn't require these. If the bank provides security, you can easily get the card.

Who can get it?
This card is available to anyone with even a small amount of savings and who can afford an FD. This includes students, first-timers, housewives, retired individuals, those living in small towns, or those with a poor or zero credit score. They only need an FD, nothing else.

How does it work?
Suppose you make an FD of ₹50,000, the bank will give you a credit card up to ₹45,000. Use it just like a normal card, whether for online shopping, bill payments, swiping at stores, or UPI payments.

Pay your bills on time every month. If you don't pay for two consecutive months, the bank will deduct the money from your FD. This means you don't get caught in a debt trap, nor does the bank incur a loss. And the good thing is, interest continues to accrue on your FD, plus you get an interest-free period of 45-50 days.

How will your credit score improve?
Making timely payments every time increases your credit score. You learn to spend within your limits and avoid paying interest. If you manage your cards well for 6-12 months, your score improves significantly. This is a great way to teach financial discipline.

Why do banks offer secured cards to new customers?
Because the bank's risk is zero. The FD is there! Even if the customer misses a payment, the bank will withdraw its money. Therefore, banks happily offer cards to new customers. The customer gets their wish fulfilled, and the bank gets security. Both are happy.

Don't secured cards offer rewards or cashback?
This is a completely wrong notion! These days, most secured cards come with a whole host of perks – cashback, reward points, discounts, UPI rewards, and many people use them as a second card.

How much can you start with?
At Kotak, you can start with an FD of just ₹10,000. Start small, and as your income grows or your confidence increases, increase your FD, and the limit will increase.

What if you miss a payment?

It's best to pay on time, but if you miss two consecutive months, the bank will deduct the money from the FD. Recovery agents won't come, and your debt burden won't increase. You're protected, and so is the bank. But remember: paying on time will increase your score.

Will you get an unsecured card later?
Absolutely! Those who manage well for 6-12 months, make timely payments, and use less are offered an unsecured card by the bank itself. You get a higher limit, better rewards, and fee waivers.

This is your first step into the world of credit, leading you to complete financial freedom.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.