Understanding Credit Cards Against FD
A credit card against an FD allows individuals to avail of a credit card by pledging their Fixed Deposit as collateral. In this setup, the Fixed Deposit serves as security for the credit card issuer, reducing the risk associated with lending credit. This arrangement is particularly beneficial for individuals with limited or poor credit histories, as it provides access to credit based on the value of the FD rather than the applicant’s creditworthiness.Can You Withdraw Money from a Credit Card Against an FD?
Yes, you can withdraw money from a secured credit card against an FD. Here’s how it works:- FD as Collateral: When you apply for a credit card linked to an FD, the bank or credit card issuer will typically require you to maintain a Fixed Deposit with them. The amount of the FD serves as collateral and determines your credit limit on the card.
- Credit Limit: The credit limit on your credit card will be a percentage of the value of the FD. For example, if you have an FD of Rs. 50,000, the credit limit on your linked credit card might be around 80% to 90% of that amount, i.e., Rs. 40,000 to Rs. 45,000.
- Credit Card Usage: You can use the credit card just like any other regular credit card. It can be used for making purchases, paying bills, and withdrawing cash from ATMs.
- Cash Withdrawals: To withdraw money from an ATM using your credit card, simply insert the card, enter the PIN, and select the amount you wish to withdraw. The withdrawn amount will be deducted from your credit limit.
- Interest Charges: Keep in mind that cash withdrawals using a credit card typically attract higher interest rates compared to regular purchases. Interest begins to accrue immediately from the day of the withdrawal, so it’s advisable to repay the cash advance as soon as possible to minimise interest charges.
- Monthly Billing: Credit card issuers provide a billing statement every month, detailing your transactions, outstanding balance, and minimum payment due. It’s essential to make at least the minimum payment by the due date to maintain a good credit history.
Kotak Credit Card Limit Against FD
Kotak Mahindra Bank, like many other financial institutions, offers credit cards linked to Fixed Deposits. The Kotak credit card limit against an FD is determined by the value of the Fixed Deposit you pledge as collateral. Here’s how Kotak Mahindra Bank’s credit card against FD typically works:- Fixed Deposit Requirement: To obtain a Kotak credit card against an FD, you will need to open a Fixed Deposit with the bank. The amount of the FD will serve as collateral for your credit card.
- Credit Limit: Kotak Mahindra Bank typically offers a credit limit of up to 80% to 90% of the value of the FD. For instance, if your FD is worth Rs. 50,000, your credit limit on the Kotak credit card could range from Rs. 40,000 to Rs. 45,000.
- Usage and Withdrawals: You can use your Kotak credit card for various transactions, including cash withdrawals from ATMs. The credit limit will determine the maximum amount you can withdraw as a cash advance.
- Interest Rates: Be aware that cash advances on credit cards usually come with higher interest rates compared to regular purchases. Kotak Mahindra Bank will charge interest from the day of the cash advance until the day you repay it.
- Billing and Payments: Kotak Mahindra Bank will provide you with a monthly billing statement summarising your card activity. It is crucial to make at least the minimum payment by the due date to avoid late fees and maintain a positive credit history.
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