Secured Credit Cards - A Comparison of Options

Plastic money has become a new trend, and credit cards are a prominent factor that has encouraged people to rely more on plastic money. Credit cards are one of the credit facilities available to people with good credit scores.

This doesn't mean you can't get a credit card if you have a bad credit score. Multiple lenders/banks provide you with a secured credit card that is something different from the traditional credit cards.

What Is a Secured Credit Card?

As the name suggests, a secure credit card is a card that is backed by an advance cash deposit. The cash deposit works as collateral against the credit card. This provides lenders/banks security for missed out payments by the borrower. The credit limit is entirely the amount you deposit as collateral against your card in a secured credit card.

Secured credit cards are often offered to borrowers with low or poor credit scores. Moreover, this card is highly beneficial for improving your credit score. Your secured credit card details are shared with the credit agencies that improve your authority and build a better CIBIL score.

How a Secured Credit Card Works

Commonly credit cards are unsecured credit facilities where you use the credit in advance and pay it after 45 days. However, this facility is primarily available for borrowers with good credit scores. In standard credit cards, nothing is secured as it is entirely given based on the borrowers' credit history.

But, if you are not repaying the bills on time, adding an outstanding amount to your debts, it's a clear sign of inefficient management of your funds, creating a financial crisis. As credit cards are primarily unsecured, they are levied at high-interest rates.

People with bad credit profiles are recommended secured credit cards to use their credit cards wisely alongside building their credit score.

How to Apply for a Secured Credit Card

If you are planning to take a secured credit card, you can get it in the same way as a regular credit card. Almost all banks/lenders provide you with secured cards. Some cardholders can even enjoy additional perks. Cardholders also get their monthly bills (like usual credit cards), including their monthly expenses and balances. Moreover, you need to pay at least the minimum due and pay interest on the outstanding bill.

Remember, secured credit cards come with annual fees and a few other charges (activation fees, credit increase fees, monthly maintenance fees, etc.) Often these charges are auto-debited from your collateral deposit.

Interestingly, your credit history depends on the amount you deposit as collateral against your secured card. Whenever you apply for a secured credit card, the bank/lender makes a hard credit inquiry to check your credit history and ensure you can pay the monthly bill.

How Do Secured Credit Card Deposits Work?

The science behind secured credit cards is simple to understand. You deposit a specific amount (decided by the bank) in secured cards, and you get a card with an exact credit limit. You must know that the amount deposited as collateral can't be withdrawn after issuing the card. Instead, the amount is kept in reserve.

Your collateral will only be used if you default on the payments. If you plan to close your secured credit card, you can only get the deposit amount back if you have paid all the outstanding bills. Some banks/lenders regularly review your credit profile and can convert your secured credit card into a standard credit card if you pay your dues timely. In such a case, you get your deposit back.

Now you have a sound understanding of secured credit cards. It's time to discuss some of the secured credit cards you can consider.

Secured Credit Card	Annual Fee	Minimum FD Amount
Paisabazaar Step UP Credit Card	Nil (Rs. 200 Joining fee for Rs. 2,000 FD)	Rs. 2,000
SBI Card Unnati	Nil (Rs. 499 from 5th year)	Rs. 25,000
Axis Insta Easy Credit Card	Nil	Rs. 25,000
Kotak 811 #DreamDifferent Credit Card	Nil	Rs. 10,000
ICICI Bank Instant Platinum Credit Card	Nil	Rs. 30,000

 

Paisabazaar Step UP Credit Card

This secured credit card gives you a 100% deposit amount as your credit limit. It is one of the best options for individuals with low credit scores. It is tough to qualify but comes with various rewards for spending.

• Joining Fee: Zero (Rs. 200 for Rs. 2,000 FD)
• Renewal Fee: Zero
• Minimum FD Amount: Rs. 2,000

Features

• Provides up to 6% interest rate on your FD
• Give 100% of your FD as a credit limit.
• Gives an interest-free grace period from 20 to 50 days
• Gives 1 reward point on every Rs. 100 spent
• Provides a completely digital process to get this secured credit card

SBI Unnati Credit Card

SBI also provides you with a secured credit card if you want an everyday use card.

• Annual Fee: Zero for the first 4 years and Rs. 499 fifth year onwards
• Minimum FD Amount: Rs. 25,000

Features

• Gives 1 reward point on every Rs. 100 spent
• Gives Milestone Reward (Rs 500 Cashback) within 15 days of spending more than Rs. 50,000
• Offer 1% fuel surcharge waiver on fuel transactions between Rs. 500 to Rs. 3,000
• Can convert your outstanding amount into EMI of 3-6 months.
• Gives an interest-free grace period from 20 to 50 days

Axis Bank Insta Easy Credit Card

This secured credit card is also a good option with various facilities and rewards.

• Annual Fee: Zero
• Minimum FD Amount: Rs. 25,000

Features

• Get the highest credit limit equal to 80% of the FB value.
• Offers 15% discount at partner restaurants in India
• Allows converting transactions over Rs. 2,500 into EMIs
• Can report the loss of a card and ask for replacement via Visa International Global Card Assistance Services with an Axis Bank
• Provides 1% fuel surcharge waiver on fuel transactions

Kotak 811 #DreamDifferent Credit Card

It is a lifetime-free secured credit card with no annual fees.

• Annual Fee: Nil
• Minimum FD Amount: Rs. 10,000

Features

• Gives 1 reward point on every Rs. 100 spent
• Gives 2 reward points on every Rs. 100 spent online and 11 reward points on every Rs. 100 spent offline
• Can withdraw up to 90% of the FD as credit limit (NOTE: Rs. 300 processing fees is charged per Rs. 10,000 withdrawn)
• Provides 1% fuel surcharge waiver on fuel transactions between Rs. 500 to Rs. 3,000
• Provides 1.8% waiver on transactions on irctc.co.in and 2.5% on Indian railway booking counter (Maximum amount of up to Rs. 500 in a year)
• Gives Milestone Reward (Rs 750 Cashback) or 4 free PVR tickets on spending more than Rs. 75,000 in a year
• Get cover of Rs. 50,000 provided against frauds in case of 7 days of pre-reporting of a stolen card

ICICI Bank Instant Platinum Credit Card

ICICI secured credit card is a good option for borrowers planning to maintain their credit score.

• Annual Fee: Zero
• Minimum FD Amount: Rs. 30,000

Features

• Rs. 100 on up to 2 movie tickets per month at BookMyShow
• Gives 3 reward points on every Rs. 100 spent (No reward points on fuel transactions)
• Offers 15% discount dining at over 2,600 restaurants via Culinary Treats Program
• Available at a low-interest rate of just 2.49% per month

Is a Secured Credit Card Good?

Everyone asks this big question before applying for a secured credit card. Undoubtedly, secured credit cards are expensive to get, but they are highly effective in improving your credit score.

Secured credit cards are expensive because of the numerous charges associated with the card.

Annual Percentage Rates (APRs): APRs for secured cards are often higher than the usual credit cards. The APR is often more than 20% which is higher than usual cards.

Most people prefer a secure card to build a credit score. Secured cards are focused on borrowers with bad credit scores as it comes with collateral. The entire amount you deposit for the secured card is reserved to compensate if you default on your loan. If you continue repaying the bills timely, it will help you build a credit score.

Build Credit Score with a Secured Credit Card

The right way to improve your credit score with a secured credit card is to repay the bills responsibly. If you continue repaying the bills timely, you will build a good credit score. A standard credit card only sends you a monthly bill that includes your due amount, minimum due, and the overall credit limit available. With a secured credit card, your information is shared with the credit bureaus that include the information in building your credit report.

With timely payment and smart use of your secured credit card, you can also get an opportunity to increase your credit limit. Some banks/lenders also upgrade your credit card from secured to unsecured. In such a case, you get your deposited amount back.

However, if you skip your regular bills, it won't benefit your credit score. Instead, you will add an outstanding amount supplemented with high-interest charges on the overdue bills. Instead, the same information is shared with the credit bureau that negatively impacts your credit report.

You are paying high for secured loans and still not getting benefits in increasing your credit score. This won't make sense! Hence, it's important to maintain timely repayment if you are depositing collateral for secured loans.