Skip to main content

If you have Low Cedit score - Use asset-backed (secured) credit cards



Asset backed credit score can help you to build your credit repayment history, which in turn helps you to improve your credit score over a medium term.

The credit card penetration in India has been dismal, reaching just 21 million in 2014-15. The primary reasons for this snail-paced growth are tough standards and filters used to issue cards to credit-worthy applicants. You can be denied a credit card based on your credit score, low or irregular salary, among many other reasons. In such cases, an asset-backed (secured) credit card can come to your rescue.

Banks offer secured credit card against fixed deposits (FDs) opened with them. These credit cards are called secured because banks can close your FD in case you default on bill payments. These FDs, in turn, are lien marked and therefore, you cannot close them as long as you hold the secured credit card issued. Usually, banks provide up to 85% of the FD as the credit limit. Secured credit card works like a normal credit card while you continue to earn interest on your fixed deposit. If you fail to pay your card bills, the bank has the right to liquidate the FD and recover debts.

Who should opt for such credit cards?

Individuals, whose credit card applications have been rejected because of:

•Having low credit score
•Being self-employed or unemployed
•Not meeting the income criteria of the respective bank
•Residing in blacklisted areas
•Being employed with blacklisted companies

Advantages:

1.Improvement in credit score: People with bad credit score can use a secured credit card to improve their credit score by regularly using the card and paying the bill.

2.Building credit history: If you are not yet part of the credit system, a secured credit card can pave the way forward. Besides having a savings account, it is important to have some type of debt component, such as a credit card, in your portfolio as when you later apply for a loan you may benefit from a lower interest rate.

3.Earning interest on FD simultaneously: Even if you are using your secured credit card, you will continue to earn interest on your fixed deposit.

4.Increased liquidity: Secured credit card can help in avoiding premature closure of fixed deposits if you are in need of urgent cash.

5.Increased credit limit: Secured cards can also help increase your credit limit instantly. For instance, credit limit of your current credit card is Rs 50,000, and you want to increase it to Rs 1,50,000. In such a scenario, you can avail a secured credit card without waiting for the bank to increase your limit on the current card.

6.Minimum documentation: Secured credit cards require very few documents when compared with usual credit cards and the processing is often quicker.

Disadvantages:

•As your FD is no longer a liquid asset, you cannot close it as long as you have the credit card.

•Any default in payment will again downgrade your credit history.

Providers of FD-backed credit cards

Very few banks in India offer secured credit cards despite the lower risk of default. Banks usually focus on unsecured credit cards because of higher revenues from interest and other charges. Let's compare features of secured credit cards currently available:

 

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

OR

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

OR

Leave a missed Call on 94 8300 8300

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

Popular posts from this blog

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...
Read more

Good time to invest in Infrastructure Funds

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Good time to invest in infrastructure The Sensex has gained almost 10 per cent from May 15 till date, while the CNX Infrastructure Index has gained almost 17 per cent in the period. The price to earnings ( P/ E) ratio of the BSE Sensex is 18.96; for the CNX Infrastructure Index, it is 24.57. The estimated P/ E for next year is 14.04 for the Sensex. Of the 24 companies that make up the CNX Infrastructure Index, six have a P/ E higher than 20. Does this mean infrastructure is fairly valued? Or, has it run up quite a bit? According to experts, barring stray companies, the infra sector is fairly valued and it is a good time to invest. Even if some companies are facing debt restructuring problems, once interest rates come down and regulatory norms become flexible, they will start giving good re...
Read more

TDS Rate and Personal Account Number(PAN)

    The TDS rate doubles to 20% from 10% if you fail to mention your Personal Account Number   IF you run a glance through your pay slip, you will come across something called TDS, which is tax deduction at source. In most cases, the employer deducts this amount at the time of payment of salary itself and pays the total tax amount to the government on behalf of all the employees. If you are a self- employed or practicing professional s, you have to pay this amount yourself.    Tax deducted at source is one of the modes of income tax collection by the government. Under the income-tax laws, income tax at specified rates is required to be deducted while making certain payments.    The rate of deduction of tax at source on interest and rent payment is 10%. For salary payments, the employers deduct income tax at source on a monthly basis after computing income tax liability on estimated annual taxable income of the employee. Tax benefits on housing loan, investments, etc are consid...
Read more

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...
Read more

Fortis Mutual Fund

Fortis Mutual Fund, a relatively new player, it is still to prove its case and define its position in the industry. In September 2004, it came onto the scene with a bang - three debt schemes, one MIP and one diversified equity scheme. And investors flocked to it. Going by the standards at that time, it had a great start in terms of garnering money. Mopping up over Rs 2,000 crore in five schemes was not bad at all. The fund house has not been too successful in the equity arena, in terms of assets. Though it has seven equity schemes, it is debt and cash funds that corner the major portion of the assets. Most of the schemes are pretty new, and the two that have been around for a while have a 3-star rating each. The last two were Fortis Sustainable Development (April 2007), which received a rather poor response, and Fortis China India (October 2007). Fortis Flexi Debt has been one of the better performing funds, after a dismal performance in 2005. It currently has a 5-star rating. None ...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now