Secured Credit Cards in India for Building Credit Score: A Comprehensive Guide

In today’s financial landscape, a good credit score is more than just a number; it’s a key that unlocks various financial opportunities.¹ From securing loans and mortgages to renting an apartment and even getting better insurance rates, a healthy credit score plays a pivotal role.² However, for individuals who are new to credit, have a limited credit history, or are looking to rebuild their credit after past financial setbacks, obtaining a traditional, unsecured credit card can be a significant hurdle. This is where secured credit cards come into play, offering a pathway to establish or improve creditworthiness.

This comprehensive guide delves deep into the world of secured credit cards in India, specifically focusing on their role in building a strong credit score. We will explore what secured credit cards are, how they function, their benefits and drawbacks, key features to look for, eligibility criteria, application processes, responsible usage strategies, and some of the top secured credit card offerings available in India as of May 19, 2025.

Understanding the Basics: What is a Secured Credit Card?

A secured credit card is a type of credit card that requires the applicant to provide a security deposit to the issuing bank or financial institution.³ This deposit acts as collateral, securing the credit line extended to the cardholder. Unlike unsecured credit cards, which rely solely on the borrower’s credit history and creditworthiness, secured credit cards mitigate the risk for the lender by having a tangible security in place.

The credit limit on a secured credit card is typically linked to the amount of the security deposit. Banks usually offer a credit limit that ranges from 70% to 100% of the deposit amount. This means that if you make a fixed deposit of ₹20,000, your secured credit card might have a credit limit of ₹14,000 to ₹20,000.

How Do Secured Credit Cards Work?

The fundamental mechanism of a secured credit card is similar to that of a regular, unsecured credit card. Here’s a step-by-step breakdown:

1. Security Deposit: The applicant opens a fixed deposit (FD) account with the issuing bank for a specific amount. This FD serves as the security for the credit card. The minimum FD amount can vary from bank to bank, ranging from a few thousand rupees to a larger sum.
2. Credit Limit: Based on the FD amount, the bank issues a secured credit card with a pre-determined credit limit. As mentioned earlier, this limit is usually a percentage of the FD value.
3. Usage: The cardholder can then use the secured credit card for purchases, both online and offline, up to the assigned credit limit.
4. Billing and Repayment: Just like with unsecured credit cards, the cardholder receives monthly statements detailing their transactions and the total amount due. They are required to make at least the minimum payment by the due date to avoid late payment fees and negative impacts on their credit score. Paying the full outstanding balance each month is highly recommended to avoid interest charges.
5. Credit Reporting: The issuing bank reports the cardholder’s payment activity to credit bureaus in India (such as CIBIL, Experian, Equifax, and CRIF High Mark). Timely payments and responsible credit utilization are recorded positively, contributing to the building or improvement of the credit score. Conversely, late payments or defaults are reported negatively, which can harm the credit score.⁴
6. Closure and Refund of Deposit: When the cardholder decides to close the secured credit card account, and if all outstanding dues are cleared, the bank refunds the security deposit (the FD amount) along with any accrued interest, as per the terms and conditions of the fixed deposit.
7. Default Scenario: In the event of a default (failure to repay the outstanding balance), the bank has the right to liquidate the fixed deposit to recover the dues.

Benefits of Using a Secured Credit Card for Building Credit Score

Secured credit cards offer several advantages, particularly for individuals aiming to establish or rebuild their creditworthiness:

1. Higher Approval Rate: Secured credit cards have significantly higher approval rates compared to unsecured cards, especially for those with no credit history or a poor credit score. The security deposit reduces the risk for the lender, making them more willing to issue a card.
2. Opportunity to Build or Rebuild Credit: Responsible use of a secured credit card provides a tangible way to build a positive credit history. Consistent on-time payments and keeping credit utilization low demonstrate creditworthiness to lenders. This positive payment behavior is reported to credit bureaus, leading to an improved credit score over time.
3. Dual Benefits of Credit Card and Fixed Deposit: Secured credit cards allow individuals to enjoy the benefits of a credit card while their funds remain in a fixed deposit, earning interest. This provides a unique advantage of accessing credit without liquidating savings and potentially earning returns on the deposited amount.
4. Financial Discipline: The limited credit line, often tied directly to the security deposit, can encourage responsible spending habits and prevent overspending.⁵ This helps cardholders learn to manage credit effectively.
5. Potential Upgrade to Unsecured Card: Some banks may review the cardholder’s payment history and credit behavior over time.⁶ If the cardholder demonstrates consistent responsible usage, they might be offered an upgrade to an unsecured credit card with a higher credit limit and potentially better rewards. Upon upgrade, the security deposit is usually refunded.⁷
6. Accessibility for Various Individuals: Secured credit cards can be a viable option for a wide range of individuals who might face challenges in obtaining unsecured cards, including:
   • Beginners with entry-level jobs.
   • Retired individuals with no regular income but savings in the form of FDs.
   • Individuals with a poor credit history looking to rebuild their score.
   • Individuals without formal income proof, such as homemakers or students (if they have sufficient funds for an FD).

Potential Drawbacks of Secured Credit Cards

While secured credit cards are beneficial for building credit, they also have certain limitations:

1. Requirement of a Security Deposit: The primary drawback is the need for an upfront security deposit, which might be a significant amount for some individuals. The credit limit is also tied to this deposit, which might be lower than desired.
2. Potentially Lower Rewards and Benefits: Compared to premium unsecured credit cards, secured credit cards might offer fewer rewards, cashback, or other supplementary benefits. The focus is primarily on building credit rather than extravagant perks.
3. Opportunity Cost of Fixed Deposit: The funds locked in the fixed deposit as security might have the potential to earn higher returns if invested elsewhere. The interest earned on the FD might be lower than other investment options.
4. Fees and Interest Rates: While some secured cards have low or no annual fees, others might charge fees similar to unsecured cards. Interest rates on outstanding balances also apply, and these can be relatively high, especially for individuals with a poor credit history.⁸ It’s crucial to pay the full balance on time to avoid these charges.
5. Credit Limit Limitations: The credit limit is directly proportional to the security deposit. If the deposit is small, the credit limit will also be low, which might not be sufficient for all spending needs. Increasing the credit limit usually requires increasing the fixed deposit amount.

Key Features to Look for in a Secured Credit Card

When choosing a secured credit card for building credit score in India, consider the following key features:

1. Minimum Security Deposit: Compare the minimum fixed deposit amount required by different banks. Choose one that aligns with your financial capacity.
2. Credit Limit Offered: Understand the percentage of the FD amount that will be provided as the credit limit. A higher percentage is generally more favorable.
3. Fees and Charges: Scrutinize the joining fees, annual fees, late payment fees, over-limit fees, and any other charges associated with the card. Opt for cards with minimal fees, especially if your primary goal is credit building.
4. Interest Rates (APR): While the aim should be to pay the full balance each month, understand the Annual Percentage Rate (APR) in case you carry a balance. Lower APRs are preferable.
5. Credit Reporting Frequency: Ensure that the bank reports your credit activity to all major credit bureaus in India regularly.
6. Rewards and Benefits: While not the primary focus, check for any basic rewards, cashback offers, or other benefits that might be available.
7. Upgrade Options: Inquire about the bank’s policy on upgrading secured cardholders to unsecured cards based on their credit performance.
8. Customer Support: Evaluate the quality and responsiveness of the bank’s customer support.

Eligibility Criteria for Secured Credit Cards in India

The eligibility criteria for secured credit cards are generally less stringent than those for unsecured cards. However, some common requirements include:

1. Indian Citizen: The applicant must typically be an Indian resident.
2. Age: The minimum age requirement is usually 18 years.
3. Fixed Deposit: The applicant must be willing and able to open a fixed deposit account with the issuing bank for the minimum required amount.
4. KYC Compliance: Completion of the Know Your Customer (KYC) process, including providing valid identity and address proof documents (such as PAN card, Aadhaar card, passport, etc.).
5. No Major Adverse Credit History (in some cases): While secured cards are designed for those with limited or poor credit, some banks might still have restrictions regarding recent bankruptcies or significant defaults.

Application Process for a Secured Credit Card

The application process for a secured credit card in India typically involves the following steps:

1. Research and Selection: Research different secured credit card offerings from various banks and choose one that best suits your needs and financial situation.
2. Application Submission: You can usually apply online through the bank’s website or by visiting a branch. You will need to fill out an application form and provide the required personal and financial details.
3. Fixed Deposit Opening: If you don’t already have a fixed deposit with the chosen bank, you will need to open one for the required amount. This can often be done simultaneously with the credit card application.
4. Document Submission: Submit the necessary KYC documents and the fixed deposit receipt or details.
5. Verification: The bank will review your application and verify the submitted documents.
6. Approval and Issuance: Upon successful verification, your application will be approved, and the secured credit card will be issued to you.
7. Activation: Once you receive the card, you will need to activate it as per the bank’s instructions (usually through their website, mobile app, or by calling customer care).

Responsible Usage Strategies for Building a Strong Credit Score with a Secured Credit Card

The key to effectively building a strong credit score with a secured credit card lies in responsible usage. Here are some crucial strategies:

1. Pay Your Bills On Time, Every Time: This is the most critical factor influencing your credit score. Always pay at least the minimum amount due by the due date. Ideally, aim to pay the full outstanding balance each month to avoid interest charges and demonstrate excellent credit management.
2. Keep Your Credit Utilization Low: Credit utilization ratio is the amount of credit you are using compared to your total credit limit. Experts recommend keeping this below 30%. For example, if your credit limit is ₹20,000, try to keep your outstanding balance below ₹6,000.
3. Use Your Card Regularly but Prudently: To build a credit history, you need to use your card. However, avoid unnecessary spending and only make purchases that you can afford to repay.
4. Monitor Your Credit Report: Regularly check your credit report from all major credit bureaus to ensure accuracy and track your progress. If you notice any errors, report them immediately.
5. Avoid Cash Advances: Cash advances on credit cards typically come with high interest rates and fees and do not contribute positively to your credit score.
6. Don’t Max Out Your Credit Limit: Consistently maxing out your credit limit can negatively impact your credit score, as it indicates high credit utilization.
7. Be Patient: Building a good credit score takes time. Consistent responsible usage over several months or even a year or two is necessary to see significant improvement.

Top Secured Credit Cards in India (as of May 19, 2025)

Here are some of the popular secured credit cards offered by banks in India, known for their features and suitability for building credit score:

• SBI Card Unnati: Requires a minimum fixed deposit of ₹25,000. Offers reward points and milestone rewards. No annual fee for the first four years.
• ICICI Bank Instant Platinum Credit Card: Issued against a fixed deposit with a minimum amount of ₹50,000 and a minimum tenure. Offers enhanced security with a Platinum chip.
• Axis Bank Insta Easy Credit Card: Offered against a fixed deposit ranging from ₹20,000 to ₹25 lakhs. No joining or annual fee. Offers fuel surcharge waiver.
• Kotak Mahindra Bank 811 #DreamDifferent Credit Card: Requires a minimum fixed deposit of ₹5,000 (for 811 account holders). Lifetime free card with no annual fee. Offers reward points on online and offline spends.
• IDFC FIRST Bank WOW! Credit Card: Offered instantly against an FD with a minimum amount of ₹10,000. Offers a credit limit equal to or greater than the FD value and attractive FD interest rates.
• Rupicard: A digital FD-backed credit card that allows you to choose your credit limit (up to 90% of FD amount). No joining or annual fees. Focuses on building credit score.
• Bank of Maharashtra Secured Credit Card: Requires a minimum freehold FD of ₹12,500. Lifetime free card with benefits like fuel surcharge waiver and domestic airport lounge access.
• HDFC Bank Credit Card against Fixed Deposit: Requires a minimum FD of ₹15,000. Offers benefits like rewards points, EMI options, and easy management through digital platforms.
• YES Bank Secured Credit Cards: Offers various secured credit card options against fixed deposits, with features like reward points and other privileges.
• SBM Bank India Secured Credit Cards: Offers a range of co-branded secured credit cards against fixed deposits, with varying features and benefits, often focusing on specific needs like digital transactions or zero forex markup.

Note: The specific features, fees, eligibility criteria, and minimum FD amounts may vary. It is advisable to check the latest information on the respective bank’s website before applying.

Conclusion: A Stepping Stone to Financial Well-being

Secured credit cards serve as a valuable financial tool, particularly for individuals in India who are looking to establish a credit footprint or rebuild their credit score. By providing a secured line of credit against a fixed deposit, these cards offer a lower-risk avenue to demonstrate creditworthiness to lenders. Responsible usage, characterized by timely payments and low credit utilization, is paramount in leveraging the benefits of a secured credit card to achieve a healthy credit score. As your credit profile strengthens over time, you may become eligible for more traditional unsecured credit cards with better rewards and benefits, paving the way for greater financial opportunities in the future. Remember that a secured credit card is not just a spending tool; it’s a stepping stone towards building a solid financial foundation.