Credit cards can broadly be divided into two categories: secured credit cards and unsecured credit cards.
While both work similarly when you’re making purchases and repaying your monthly bill, the biggest difference lies in how the bank gives you that credit.
A secured credit card is backed by collateral usually a Fixed Deposit (FD) while an unsecured credit card is issued based on factors such as your income, credit history and overall eligibility.
Here’s everything you need to know.
TL;DR
| Parameter | Secured Credit Card | Unsecured Credit Card |
|---|---|---|
| Security required | Yes, usually an FD | No |
| Approval difficulty | Generally easier | Depends on eligibility |
| Credit history required | Usually not necessary | Often important |
| Income requirement | Can be less strict | Usually more important |
| Credit limit | Usually linked to FD amount | Decided by the bank |
| Best for | New-to-credit users | Users with an established credit profile |
| Builds credit history | Yes | Yes |
| FD/Collateral at risk in default | Yes | No FD involved |
Simply put: A secured card is backed by your money, while an unsecured card is based on the bank’s confidence in your ability to repay.
What Is a Secured Credit Card?
A secured credit card requires you to provide collateral, which in India is usually a Fixed Deposit with the bank.
For example, if you create a ₹20,000 FD, the bank may issue you a credit card with a credit limit linked to that FD. Depending on the issuer, this could be a percentage of your FD or, in some cases, close to the full amount.
The FD reduces the bank’s risk, which is why secured cards are generally easier to obtain.
Important: Your FD isn’t used for everyday transactions
This is a common misconception.
Suppose:
- Your FD is ₹20,000
- Your credit card limit is ₹20,000
- You spend ₹5,000
That ₹5,000 is not deducted from your FD.
You will still receive a credit card bill and are expected to pay it by the due date. Your FD simply acts as security for the bank.
As long as you manage the card properly, the FD generally remains untouched and continues earning interest according to its terms.
What Is an Unsecured Credit Card?
An unsecured credit card does not require an FD or any other collateral.
Instead, the bank evaluates your profile before deciding whether to approve your application and what credit limit to offer.
Factors can include:
- Your income
- Credit score and credit history
- Existing credit cards and loans
- Repayment history
- Employment profile
- Relationship with the bank
Most mainstream credit cards are unsecured.
If you have a reasonable credit history and meet the bank’s eligibility requirements, you can get a credit card without locking money into a Fixed Deposit.
Who Should Get a Secured Credit Card?
Secured cards are particularly useful for people who are new to credit.
i) Students and first-time credit card users
Students and young professionals may not have a long credit history or a regular income that meets the requirements for certain unsecured cards.
An FD-backed card can make getting your first credit card easier.
ii) People with no CIBIL history
If you have never taken a loan or used a credit card before, you may not have enough credit history for some lenders to evaluate you.
A secured credit card can help you start building a credit profile, provided the issuer reports your activity to credit bureaus.
iii) People struggling to get approved
If you’ve been rejected for unsecured credit cards due to a limited credit profile, a secured card can be a more accessible alternative.
Who Should Get an Unsecured Credit Card?
If you already have:
- A stable income
- A reasonable credit history
- Good repayment behaviour
- Eligibility for suitable cards
…then an unsecured card is generally more convenient.
You don’t need to lock money into an FD just to receive a credit limit.
Unsecured cards also cover everything from basic lifetime-free cards to premium cards offering cashback, rewards, travel benefits and other perks.
Do Secured Credit Cards Build CIBIL?
Yes.
A secured credit card can help establish or improve your credit history, just like an unsecured credit card, as long as the issuer reports your account and repayment activity to credit bureaus.
The key is responsible usage:
- Pay your bills on time.
- Prefer paying the total amount due.
- Avoid carrying unpaid balances.
- Don’t regularly max out your credit limit.
The fact that the card is backed by an FD does not mean your repayment behaviour doesn’t matter.
Missed payments can still affect your credit history.
What Happens If You Don’t Pay a Secured Credit Card Bill?
You should treat a secured credit card exactly like any other credit card.
If you miss payments, interest and other applicable charges may apply, and your credit history can be affected.
Since the card is backed by collateral, the bank may also have the right to recover eligible unpaid dues from the FD in the event of default, according to the agreement.
So, having an FD-backed card doesn’t mean you can ignore the monthly bill.
Which One Should You Choose?
| Your Situation | Better Option |
|---|---|
| You’re new to credit | Secured card |
| You’re a student with limited eligibility | Secured card can be a good starting point |
| You have no credit history | Secured card |
| You already have a good credit profile | Unsecured card |
| You don’t want money locked in an FD | Unsecured card |
| You’ve been rejected for unsecured cards | Consider a secured card |
| You already planned to maintain an FD | A secured card may make sense |
Which Credit Card Should You Choose?
Whether you should get a secured or unsecured credit card depends largely on your current credit profile and spending habits.
i) New to Credit or Want an FD-Backed Card?
If you have no credit history, are struggling to get approved for an unsecured card, or simply want to start your credit journey with an FD-backed card, a secured credit card can be a good option.
Some FD-backed credit cards to consider include:
- IDFC FIRST WOW Credit Card
- IDFC FIRST Hello CashBack Credit Card
- Tata Neu Plus HDFC Bank Credit Card (FD-backed option, where available)
These cards can help you access a credit card while using your Fixed Deposit as collateral. Just remember: an FD-backed card is still a credit card, so you should repay your monthly bill in full and on time.
ii) Want Cashback on Everyday Spending?
If you already qualify for an unsecured credit card and your goal is to save money on regular expenses, look for a cashback card that rewards the categories where you spend the most.
Some popular cashback cards include:
iii) Travel Frequently?
Frequent travellers may get more value from travel-focused credit cards offering benefits such as:
- Airline miles and reward points
- Hotel benefits
- Airport lounge access
- Complimentary travel insurance
- Accelerated rewards on travel spending
However, travel rewards are most valuable when you actually use them. If you rarely travel, a straightforward cashback card may provide better value.
Some popular travel-focused cards include:
iv) Have High Monthly Spending?
If you spend significantly every month, a premium credit card may offer better overall value through higher reward rates, milestone benefits and premium lifestyle perks.
However, don’t choose a premium card just because it has a long list of benefits. Make sure the annual fee is justified by the rewards and benefits you will actually use.
Some popular premium cards include:
v) Not Sure Which Card Fits Your Spending Pattern?
If you’re unsure whether a secured card, cashback card, travel card or premium card makes the most sense for you, compare your options based on your actual spending.
Consider factors such as:
- Your monthly spending categories
- Reward rates
- Annual fees
- Joining and renewal benefits
- Redemption options
- Lifestyle and travel benefits
Use Great.Cards to compare credit cards based on your spending, rewards, fees and benefits, and find the cards that offer the most value for you.
You can also explore and compare credit cards on Great.Cards Credit Card Store to find the best option for your needs.
FAQs
Is a secured credit card the same as a prepaid card?
No. With a prepaid card, you’re spending your own money directly.
With a secured credit card, the bank gives you a credit limit and you repay your spending later. The FD simply acts as security.
Will my FD be deducted when I use the card?
No. Your purchases are charged to your credit limit, and you receive a monthly bill like with any other credit card.
Does my FD continue earning interest?
Generally, yes. The FD continues according to its applicable terms while being held as security, although you should check the specific issuer’s terms.
Is a secured credit card better for CIBIL?
Not necessarily. Both secured and unsecured credit cards can help build your credit history. Your repayment behaviour matters more than whether the card is secured.
Should I get a secured card if I qualify for an unsecured card?
Usually, an unsecured card is more convenient because you don’t have to lock money into an FD. However, the specific benefits and features of the card should also be considered.
Final Thoughts
A secured credit card isn’t a “worse” credit card. It simply serves a different purpose.
For someone starting their credit journey, an FD-backed credit card can be one of the easiest ways to access credit and begin building a repayment history.
For someone who already qualifies for regular credit cards, an unsecured card is generally the more convenient option.
At the end of the day, secured vs unsecured matters less than how you use the card: spend within your means, pay on time and preferably pay your bill in full every month.