Wednesday, 16 September 2026 07:20 AM
Company Update
MUMBAI, IN / ACCESS Newswire / September 16, 2026 / A fixed deposit allows you to set aside money for a defined period while earning interest on the deposit. An FD-backed credit card uses that fixed deposit as security, giving you access to credit without withdrawing the deposit.
The FD remains linked to the credit card as collateral, while the card provides a separate credit limit. Understanding how the deposit works alongside the card is important before choosing this type of credit facility.
How Does an FD-Backed Credit Card Work?
An FD-backed credit card is a secured credit card issued against a fixed deposit. The bank places a lien on the deposit, which means the FD is linked to the credit card and cannot be freely withdrawn while it secures the card.
The credit limit is linked to the FD amount and is set according to the issuer's terms. For example, a card offering a credit limit of 90% of the FD amount provides a credit limit of ₹45,000 against a ₹50,000 fixed deposit.
The credit card works separately from the FD. You use the credit limit for eligible purchases and payments, while the fixed deposit remains invested.
Does the Fixed Deposit Continue to Earn Interest?
Yes. The fixed deposit continues to earn interest according to its applicable terms while it serves as collateral for the credit card.
Linking the FD to the card does not mean that the deposit has been used for spending. The FD remains invested, while the credit card provides a separate source of credit.
The interest earned on the FD is also separate from the credit card balance. A card transaction does not reduce the amount held in the fixed deposit.
Can You Withdraw the Fixed Deposit?
You cannot freely withdraw the linked FD while it is securing the credit card. The lien on the deposit must be released according to the issuer's terms before the FD can be closed or withdrawn.
This means you should consider the FD as committed for as long as it serves as security for the card. If you expect to need the deposit for another financial requirement, account for this restriction before creating the FD.
The money in the FD has not been spent. It remains your deposit, but access to it is restricted while the lien is active.
What Happens If You Do Not Pay Your Credit Card Dues?
The fixed deposit serves as security for the credit card. If outstanding dues remain unpaid, the issuer can recover the eligible outstanding amount from the linked FD under the card agreement and applicable procedures.
The FD-backed structure does not remove the requirement to pay your credit card bill. Timely repayment remains important for managing the card and maintaining a healthy credit history.
The issuer's right to use the FD as security applies when the conditions specified in the card agreement are met. The deposit is not automatically used to pay every credit card bill.
What Should You Check Before Getting One?
Before applying for a fixed deposit credit card, review the terms of both the FD and the credit card.
Check the minimum FD amount, FD tenure, credit limit offered against the deposit, interest rate, joining or annual fees, finance charges, late payment charges, and other applicable fees.
You should also understand how the FD is linked to the card, when the lien can be released, what happens if you miss payments, and the process for closing the card and withdrawing the FD.
If you are considering instant approval credit cards, check the issuer's eligibility requirements and approval process. An approval decision does not change your responsibility to repay the credit card dues on time.
Conclusion
An FD-backed credit card allows a fixed deposit to remain invested while serving as security for a separate credit facility. The FD continues to earn interest according to its applicable terms, while the cardholder uses a separate credit limit for eligible transactions.
Understanding the relationship between the FD, credit limit, repayment obligations, and lien helps you use an FD-backed credit card clearly.
FAQs
1. Is the credit card limit the same as the FD amount?
No. The credit limit is set as a percentage of the linked FD amount according to the issuer's terms. The credit limit and FD value are therefore not necessarily the same.
2. Does spending on the credit card reduce my FD balance?
No. Credit card spending does not reduce the FD balance. The FD remains invested while the credit card balance is managed separately.
3. Can I use more than one FD to increase my credit limit?
Some credit card issuers allow multiple eligible FDs to be linked to the same card. The applicable conditions depend on the issuer and card.
Media Details:
Name: Kotak811
Call us on: 1800 4100
Email : [email protected]
SOURCE: Kotak811