Secured Credit Card vs Unsecured Credit Card
Experience the all-new Kotak Netbanking
Simpler, smarter & more intuitive than ever before
Quick Help
Frequently Asked Questions
Show More
For Kotak Bank Customers
For Kotak811 Customers
Experience the all-new Kotak Netbanking Lite
Simpler, smarter & more intuitive than ever before. Now accessible on your mobile phone!
Yes, it is one of the simplest and most reliable ways to build a credit score. A secured card backed by a fixed deposit helps first-time users show repayment discipline. Over time, this consistent record can make them eligible for unsecured cards with better benefits.
The required amount varies across banks. It usually depends on the minimum credit limit the bank offers. Typically, banks set the minimum FD amount to ensure the credit limit aligns with internal risk guidelines. It’s best to check with the issuing bank for specific details.
Yes, most secured credit cards can be used internationally once global usage is enabled. However, international transactions may attract certain charges depending on the bank’s terms. Cardholders should verify applicable fees and limits before using the card abroad.
Yes, since a secured card is backed by a fixed deposit, the bank faces less risk. This makes it easier for applicants with limited or no credit history to get approval. It is often the preferred option for individuals starting their credit journey.
Both secured and unsecured cards can improve credit scores when payments are made on time. A secured card is particularly useful for beginners, while an unsecured card helps maintain a strong score once credit history is established. Regular usage and timely repayment matter most.
In most cases, yes. Unsecured credit cards come with wider reward programs, including cashback, discounts, and travel benefits. Secured cards, on the other hand, focus more on helping users build credit, offering limited but essential features.
Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein
What is a Secured Credit Card or Credit Card Against Fixed Deposit
A secured credit card is issued against a fixed deposit, which acts as collateral for the bank. The credit limit is usually a percentage of the deposit amount, reducing the bank’s risk.
This type of card is suitable for individuals who:
Are new to credit and don’t yet have a credit history.
Have a low credit score and want to rebuild it.
Want access to a credit card without traditional eligibility criteria.
The fixed deposit remains in the customer’s name, and the cardholder continues to earn interest on it, depending on the bank’s policy. The card can be used like any regular credit card — for shopping, online payments, or bill settlements.
How Does a Secured Credit Card Work
Getting a Kotak secured credit card is simple: open a fixed deposit, and the bank issues a card with a limit based on the deposit.
For example, if a customer holds a fixed deposit, the credit limit may be determined based on the internal policy of the bank. The cardholder can then use the card for purchases, pay bills on time, and build a good repayment track record.
Missed payments can lead to recovery from the fixed deposit, making it safer for banks and easier for beginners.
Advantages and Disadvantages of Secured Credit Cards
Advantages
Disadvantages
Easy approval: Ideal for individuals with no or poor credit history.
Credit-building tool: Regular, timely repayments help build a strong credit record.
Continued interest: The fixed deposit continues to earn interest.
Controlled limit: The deposit-based limit helps prevent overspending.
Upgrade potential: Over time, responsible usage can lead to eligibility for unsecured cards.
Requires a fixed deposit: The card cannot be issued without one.
Funds remain locked: The deposit is unavailable until the card is closed or upgraded.
Limited flexibility: The credit limit depends entirely on the deposit size.
What is an Unsecured Credit Card or Regular Credit Card
An unsecured credit card is the standard card most users are familiar with. It does not require any deposit or collateral. The approval depends entirely on the applicant’s credit score, income, and repayment history.
These cards are designed for individuals who already have an established credit profile. These cards offer higher limits, better rewards, and lifestyle benefits like cashback and travel perks.
Unsecured credit cards are more common because they offer greater flexibility and benefits. However, they also carry higher responsibility since they are not backed by any security deposit.
How Does an Unsecured Credit Card Work
When applying for an unsecured credit card, the bank assesses the applicant’s financial profile — including income stability, credit score, and past repayment record. Once approved, the bank sets a credit limit based on that profile.
Timely full payments avoid interest and maintain a strong credit score. Paying the total amount due on time each month helps maintain a good credit score and avoid interest charges.
If payments are delayed, interest is added, and repeated delays can lower the cardholder’s credit rating.
Advantages and Disadvantages of Unsecured Credit Cards
Advantages
Disadvantages
No collateral required: No need to keep a fixed deposit or security.
Wider rewards and offers: Cashback, travel points, and lifestyle benefits.
Flexible limits: Banks can increase credit limits over time with consistent repayment.
Convenience: Suitable for users with a stable income and established credit score.
Stricter eligibility: Not easily available for individuals with low credit scores.
Higher interest rates: Applicable if the outstanding balance is not cleared.
Credit risk: Missed payments can lead to penalties and a drop in credit score.
Difference Between Secured and Unsecured Credit Cards
While both secured and unsecured cards offer the same features — such as online payments, cash withdrawals, and reward points — their working and eligibility differ significantly.
Basis
Secured Credit Card
Unsecured Credit Card
Collateral
Requires a fixed deposit as security
No collateral required
Eligibility
Easier to get for new credit users
Requires income and good credit history
Credit Limit
Based on deposit amount
Set by bank as per user profile
Risk to Bank
Low, as deposit covers default
Higher, as no security involved
Ideal For
Beginners or those rebuilding credit
Experienced users with stable credit
Rewards
Basic features and limited offers
Broader range of benefits
Approval Time
Usually, faster
Depends on credit assessment
In short, secured credit cards are entry-level options for beginners, while unsecured credit cards are designed for those who already have credit experience.
Which is Better – Secured or Unsecured Credit Card
There’s no single answer, it depends entirely on an individual’s financial profile and goals.
For beginners or those rebuilding credit: A secured credit card is more suitable. It helps users start small, build their credit score through timely payments, and eventually qualify for unsecured cards.
For experienced users: An unsecured credit card is ideal. It offers higher limits, better benefits, and greater flexibility for those who already manage credit responsibly.
Both serve a purpose. A secured card helps build the foundation for financial credibility, while an unsecured card reward continued financial discipline.
You have already rated this article
OK