What are the advantages of availing secured credit card?

Any bank, planning to issue a credit card usually takes into consideration various factors like the applicant’s credit score, monthly income, repayment capacity, employer’s profile and job profile.

However, if you fail to meet the criteria determined by the credit card companies (for eg. credit score of 750), your request can be rejected. What should you do in such cases?

Secured credit cards can be a great substitute/alternative for those who are unable to get regular credit cards due to non-compliance of certain preset standards. So, how do they differ from regular credit cards? Let's find out.

Often, banks issue secured credit cards in exchange of collateral in the form of fixed deposits (FDs). Here, the credit limit is assigned in accordance with the amount pledged in FDs. Typically, bank increase the credit limit up to 80% of the total amount.

Apart from FD collaterals, secured credit card embody more or less similar features like your regular credit cards. It also offers reward points, discounts and vouchers on each transactions basis the company policy.

Similar to regular credit cards, the secured credit card also offers interest-free period and charges penalty in case of non-repayment of credit card bills as per the due date. The broad rules remain the same. The flexibility is offered only in terms of eligibility.

Banks keep a record of transactions made through secured credit cards and send it to credit bureaus. Thus, customers who were previously denied regular cards due to low have the chance to improve their credit score.

The FD pledged for availing secured credit cards will continue to produce interest until maturity while being leveraged to avail additional credit. It's similar to opting for a loan against any fixed income security.

Notably, secured credit card holders can't close any fixed deposit account used as collateral until the expiry of linked credit cards. It's, thus, suggested to pledge only those securities that one can do without until the credit card expires.

Examples of secured cards include SBI Advantage Plus Card (interest rate of 2.25% per month) and ICICI Bank Instant Platinum Credit Card (interest rate of 2.5% per month).