Unlocking Benefits & Building Credit Score

How a secured credit card can help you build your financial future

The use of credit cards has grown exponentially and transformed the way we pay for things on an everyday basis, whether it’s buying your everyday grocery, paying bills, or getting some extra cash for yourself. A credit card is basically a line of credit provided by a financial institution that allows users to make purchases with a pre-approved credit limit.

These cards are the go-to solution for people and businesses looking for online or offline purchases as it allows you to distribute your payments monthly and earn rewards during the process. These rewards, cashbacks and the convenience of easy monthly repayments have made credit cards indispensable in our lives.

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The rewards that you get from your credit card is based upon the type of card you use. There are different types of credit cards available in the market, each loaded with unique features of their own. These range from fuel card to travel card, all packed with a set of offers meant to help you get the best out of your purchase. For instance, Kotak811’s PVR Kotak Platinum Credit Card, Mojo Platinum Credit Card, Myntra Kotak Credit Card, Indian Oil Kotak Credit card, etc. They come in two varieties, secured credit card and an unsecured one. Let’s look at what a secured credit card is.

Do you know what is a secured credit card?

A secured credit card is best suited for people with low credit scores. It features and benefits make it the best credit card to build credit score. The best part about these cards is that they are easier to obtain as they usually are backed by a security deposit such as a cash deposit or an FD and the limit of the card is 90% of the amount. This gives a surety to banks that in times of failure to pay, they can get their money back easily.

Secured credit cards are a go-to solution for people looking to build their credit score, or have no credit history. These cards are backed by a fixed deposit account with the bank and are easy to get.

Let’s learn what is a secured credit card? Also, explore its pros, cons, and features in depth.

What is a secured credit card?

In simple terms, a credit card that is offered when you open a fixed deposit in the bank is known as a secured credit or FD-backed credit card. The FD account serves as a collateral against which the credit card is dispatched. A real plus here is that the bank will not take your CIBIL score into consideration and instantly give you a credit card as per the FD account.

While comparing the broad features of a secured credit card to a normal/unsecured credit card, both look and work in similar fashion. Both cards offer vouchers, discounts, reward points, and interest-free periods. The main difference is in the way these cards are issued. Secured credit card requires collateral and the unsecured credit card is issued based on your credit score and income.

The benefits of getting a secured credit card are two-fold. First you get to build your credit score by using the card properly. Secondly, you get a credit limit of 90% of the FD account, and the interest rate that you were getting increases too.

These cards are a great addition that can be of great importance to build credit rating in the long run. Knowing why you need to build credit, in the long run, is essential. Below is a further exploration of the same:

Importance of building credit score for a better financial future

Building credit history is one of the most essential things to do. Banks often look out for your credit history when you place any request to get an unsecured credit card or an FD. But many people are not aware of the methods that help them build or improve their credit score. If you have a good credit score, you are sure to receive better offers for credit cards, meanwhile becoming eligible for getting a home/personal loan too. Now that we have a better idea of a secured credit card, let’s look at some benefits of getting a credit card without a credit score.

Benefits of a secured credit card

Secured credit cards are a boon for people who regularly search ways on ‘how to improve CIBIL scores without credit cards.’ These cards often help you improve your credit history or generate one for you in the long run. There are many benefits of applying for a secured credit card, such as:

1. Lower risk for lenders

Lenders are able to mitigate the risk factors of a credit card as these cards are backed by an FD and the limit provided on the card is 90% of the FD amount. This gives a surety that their money is safe, if a person fails to pay the bill.

2. Opportunity to establish a credit history

These cards offer the best way to use credit cards to build credit score and can be easily obtained by those without a credit history. By continuously using such credit cards and repaying the bills on time, you can effectively work on your CIBIL score to qualify for an unsecured card or a loan in the future.

3. Limits on credit spending

The best part about getting such cards is that they offer limited credit that is at par with the amount parked in the FD account. As you get to spend your money, it becomes a reminder not to make any unwanted purchases and be more aware of your expenses.

4. Chance to improve credit score

People with low CIBIL scores and searching for ways how to improve cibil scores without a credit card can easily get a secured credit card to help them boost their scores and become eligible for better offers on credit cards and loans in the long run.

Proper credit card usage to maintain a good credit score

When it comes to credit cards, most never use them to maintain a good credit score. They have to be made aware of the various associated factors.

Let’s have a look at some of them in depth:

1. Secured credit card fees and charges

Secured credit cards are often backed by an FD and therefore do not have any fees and charges. You can get a secured credit card from your bank by making an FD and repay the bills on-time to boost your credit score. Usually, secured credit cards do not have any joining fees or annual charges. Kotak811 Dream Different credit card is one such secured credit card that is a lifetime free card.

2. Making regular payments

Making timely payments on your card is crucial towards building your credit score. You should always remember the due date and pay before that.

3. Maintaining a low credit utilisation ratio

According to Experian, 30% of your credit score depends on credit utilisation. Maintaining a low credit utilisation ratio helps answer the woes surrounding 'how to improve CIBIL score without a credit card. Ensure you use only 30% of your credit limit at any given time.

4. Monitoring credit reports and scores

Monitoring your credit score is essential as it helps you keep track of your open and closed loan accounts. This way, if you find any discrepancy in data on CIBIL, you can promptly inform and get it corrected.

Let us have a look at the best ways to use a credit card to build a future:

1. Paying bills on time

When you pay your bills on time, your credit score will be benefited as it greatly impacts your credit report. Always keep your due date in check and pay before that.

2. Diversifying types of credit

Diversifying your credit among various options greatly affects your credit score.

3. Keeping credit accounts open and active

Instead of closing your credit accounts and opening new ones, try to keep a single credit account open and active in the long run, as it is viewed highly by credit bureaus and can play a role in building an excellent credit score too.

4. Avoiding unnecessary credit inquiries

It is important to make only a few inquiries for credit in a short period. Process new credit applications gradually, not all of a sudden, to maintain a healthy score in the long run.

5. How to improve your credit score fast

By following all the best practices, such as keeping the credit utilisation to 30% and paying bills on time, you can get your credit score to increase fast.


Secured credit cards are essential for anyone new to credit or with a low credit history as it helps to build credit score quickly and efficiently.

These cards also help you get valuable incentives, and get rewards while helping you build your credit score. By continuously making timely payments and effectively using the credit utilisation ratio, you can become eligible for an unsecured credit card or loan products in the long run.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. 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 Kotak. Kotak, its directors, employees, and 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.