Understanding secured credit cards in India: A simple, complete guide

A credit card can make life easier. It helps in online shopping, travel bookings, and even emergencies. But in India, many people do not get a regular (unsecured) credit card. The reasons are common: low income, no credit history, past loan delays, or being new to work.

This is where a secured credit card becomes useful.

A secured credit card is one of the simplest ways to enter the credit card world. It works like a normal credit card in daily use, but it is backed by a fixed deposit (FD). Because the bank has security in the form of an FD, it is easier to get approved. For many Indians, it is the first real step towards building a strong credit score.

This article explains secured credit cards in India, what they are, how they work, who should get one, and how to use them the right way.

What is a secured credit card?

A secured credit card is a credit card issued against a security deposit. In India, this deposit is usually a fixed deposit (FD) with the same bank. Here’s what happens:

• You create an FD with the bank.

• The bank gives you a credit card against that FD.

• Your credit limit is linked to the FD amount.

Even though the FD acts as security, the card is still a credit card. You can swipe it, use it online, and pay later, just like any other credit card.

How does it work in India?

The process is usually straightforward:

1. Open an FD with the bank (online or at branch).

2. Apply for the secured credit card (many banks offer it directly with the FD).

3. The bank sets your credit limit, usually as a percentage of the FD value.

4. You use the card and pay the monthly bill.

5. If you don’t pay, the bank can recover money from the FD (as per rules and terms).

Important point: your FD continues to earn interest as per the FD rate. It does not “stop” just because it is linked to a card.

What’s best credit card for you? Book a free consulation with an expert to find out!

Secured credit card vs unsecured credit card

A secured and an unsecured credit card look almost the same in daily use, but they are very different in how the bank decides to give them and how risk is managed for both sides. A secured credit card is
backed by a fixed deposit with the bank. Your FD acts as security, so the bank’s risk is lower.

Unsecured credit card is not backed by any deposit. The bank gives you a limit based on income, job profile, and existing credit history.

Secured credit card vs unsecured credit card: key differences

Who should consider a secured credit card?

A secured credit card is a good option for first-time credit users like students (where allowed), fresh job joiners, freelancers, or anyone with no credit history, as it helps them start building a credit score. It also suits people with low or irregular income who may not qualify for an unsecured card, since an FD-backed card is easier to get. Those trying to rebuild their credit score after missed EMIs or past defaults can use a secured card to slowly improve their score by making regular, on-time payments. Lastly, people who keep facing credit card rejections can choose a secured card instead of applying repeatedly, which can otherwise hurt their credit score.

Pros and cons

Pros of a secured credit card

• Easier approval: Since the card is backed by an FD, banks see lower risk, so approval chances are much higher than regular credit cards.

• Helps build CIBIL/credit score: If your card usage is reported to credit bureaus and you pay bills on time, your credit score can improve steadily.

• Works like a regular credit card: You can use it for online and offline payments, subscriptions like Netflix or Spotify, travel bookings, UPI or wallet linking (depending on the card), and even merchant offers.

• Teaches credit discipline: With a smaller limit linked to your deposit, it is a safer way to understand billing cycles, due dates, interest, and responsible spending habits.

Cons of a secured credit card

• Money gets locked in an FD: Your deposit stays blocked as long as the card is active, so you don’t have full access to that money.

• Lower credit limit: The limit depends on the FD amount; to get a higher limit, you must put in more money.

• Fees and charges apply: Even secured cards can have joining fees, annual fees, late payment charges, and interest—just like normal credit cards.

• Not free money: Even though you have deposited money, it is still credit. Missing payments can lead to interest, penalties, and the bank using your FD to recover dues.

How to choose a secured credit card in India

When choosing a secured credit card in India, first check the minimum FD requirement and select a card that fits your budget without locking more money than needed. Look at the fee structure and prefer cards with low or zero annual fees, especially if you are a beginner. Make sure the bank reports your card usage to credit bureaus like CIBIL, as this is essential for building your credit score. It is also helpful to choose a card that offers an upgrade to an unsecured card later based on good repayment history. While rewards and offers are a bonus, your main focus should be on usefulness and building a clean, disciplined credit record.

A secured credit card is not a “second-class” credit card. It is a practical tool. For many Indians, it is the easiest entry into the formal credit system. If used well, it can do help you build a credit score, teach you credit discipline, and open doors to better credit card later—like unsecured credit cards, personal loans at better rates, and smoother approvals.