Today I’d like to educate our Readers on what a Secured Credit Card means, its availability in India and who can avail the same.
Like any other industry, Credit Cards vertical of the banking industry had a bumpy ride since its off-take in 2005 and subsequent bust in 2008-09. Credit Cards by nature are classified as unsecured loans to consumers. The Issuing Banks Guarantees the Merchant on behalf of the credit card holders and settles with the merchant hoping the consumer will pay his credit card bill. Blame it on negligence or circumstances or willfully, many people defaulted for example ICICI Bank had to drastically re-structure its Credit Card Portfolio. Thus this gave rise to a new stream of credit cards known as Secured Credit Cards.
So what Exactly is a Secured Credit Card ? It is a normal Credit Card in all respects except that it is issued only against a Fixed Deposit with the Bank. For Example, we chose to review the subscription procedure to Kotak Aqua Gold Card which is a Secured Credit Card. Visit a branch of Kotak Bank and fill in the form of Aqua Gold Card, handover a check of at least Rs 25,000 and you are all set. This 25000 will keep earning FD Rate of Interest.
Documentation is Minimum for this card and no Income Proof is required thus Students, Housewives who wish to establish credit history can opt for the same. You will be give an acknowledgement with a number and the status of your Credit Card Application can be tracked on their website. It normally takes 45 days for the card to arrive in your hand. Credit Limit on your card will be 80% of the principal of the Fixed Deposit.
Any Hidden Charges / Application Fees ? Kotak atleast hasn’t charged us any Application or Annual Fees on the same. One of the best advantages of Kotak Aqua Gold Secured Card is, it offers Interest Free Cash Withdrawal. Normal credit cards charge Cash Withdrawal fees as well as Interest from the Minute the transaction is made at an ATM.
Purchase & Bill Settlement on Secured Credit Cards: Like any other credit card, you will be given a deadline for Bill Payment once the Bill is generated. You’ll have to make the minimum payment to be in Good Credit Standing or still better Pay off in Full. If you don’t pay off in Full then very HIGH Interest of upto 3.5% per month will be levied on the outstanding amount and any fresh charges on the card.
Can they Adjust Secured Credit Card Bill against the Amount in FD: Yes they will if the total liability on your credit card account exceeds the Fixed Deposit. But we strongly recommend you not to get into such a situation as this will negatively impact your credit history if the credit card is closed within 12 months.
Other Advantages of Going for a Secured Credit Card is you are always in Control of your Spending and even in the worst case your payment liability is Nil. These cards will help consumers establish Credit History / [CIBIL Credit Score] for your future, so essential in today’s world of highly organized and wired banking.
Among the Top Credit Card Issuers in India, SBI and ICICI are also aggressively promoting Secured Cards and the same can be obtained by visiting any of their branches.