What Is a Secured Credit Card? Meaning, Benefits & How It Works in India

A secured credit card is a credit card backed by a fixed deposit (FD) held with the bank. This deposit serves as collateral and typically equals your credit limit. It’s ideal for building or rebuilding credit when you have a low or zero CIBIL score. Functionally, it works like a regular credit card but helps establish credit history gradually.

What Is a Secured Credit Card?

Call it a credit builder card. You deposit ₹5,000–₹25,000 in an FD and receive a card with that limit. You must use it responsibly—make your payments on time, maintain utilization—and your payment history reflects on your credit report.

‘Secured Credit Card’ in some of the Indian Languages

How to explain ‘Secured Credit Cards’ to kids?

Think of a secured credit card as borrowing your own money first. You give an FD(Fixed Deposit) to the bank, like you are giving the bank some money so that it grows a bit more than you put. They let you use that same amount on a card. If you pay on time, your reliability shows up on your credit report card. Banks then trust you enough to give a card without needing your fixed deposit amount in future.

How Does a Secured Credit Card Work?

• You deposit an FD with the bank.
• The bank issues a credit card with a limit up to the FD amount
• Use it like a regular card, charging purchases and paying monthly
• Your on-time payments are reported to CIBIL, helping build credit.

Once your credit score is strong, some banks offer to convert it into an unsecured card.

Who Should Get a Secured Credit Card?

• Individuals with no credit history (e.g. students or young professionals)
• People with a low or damaged credit score
• Those looking to establish credit discipline before qualifying for premium cards
  

Secured vs Unsecured Credit Card: Key Differences

Do Secured Credit Cards Help Build Credit?

Yes, when used responsibly!

Some of the factors how it actually help are:

• On-time payment history is periodically reported to credit bureaus
• Credit utilization is tracked
• Over time, you can reach a good-to-excellent credit score, qualifying you for better offers
  

Pros and Cons of Secured Credit Cards

Pros:

• Accessible approval without prior credit history
• Helps build or rebuild credit
• Offers discipline in spending and repayment
• Option to convert into unsecured card (if credit improves)
  
  

Cons:

• Requires slow capital deposit (FD)
• Lower rewards or perks than unsecured cards
• Interest and late fees still apply if you misuse the card
  

Can a Secured Credit Card Become Unsecured?

Yes, many banks review your account after 6–12 months of consistent payments. If your credit behavior is strong, they may offer to release the FD deposit and convert the card into a standard unsecured credit card—typically with better perks and higher limits.

FAQs on Secured Credit Cards

Q1. What is a secured credit card?

A secured credit card is issued against a fixed deposit, helping users with low or no credit score build credit history.

Q2. Does a secured credit card improve credit score?

Yes, timely payments and low utilization report positively to credit bureaus.

Q3. Can a secured credit card become unsecured?

Yes. After consistent timely usage, banks may convert your card into an unsecured one.

Q4. Are secured credit cards bad?

Not at all. They’re excellent for credit beginners or those rebuilding their financial profile.

Q5. What are secured credit cards good for?

They are ideal for building credit, managing debt, and accessing credit when standard cards are unavailable.