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

Equity investors should track market developments

The stock markets have been volatile over the last few days. They are in a sideways movement and trying to find the bottom after a fall of 20 percent a week ago. The market sentiments are not very positive at the moment and the recent developments are expected to dampen them further. Globally, governments and central banks are trying to cut rates and announce packages to improve business sentiments. These are some of the major developments in the markets last few month: A) Global On the global front, another large US bank went into a financial crisis. The US government took quick measures to avoid the spread negative sentiments in the markets. The US government announced a bail-out package and agreed to shoulder the losses on the bank's risky assets. China announced a large cut in interest rates and reserve ratio to boost the investor sentiments in the markets. Recently, the World Bank announced China's growth rate next year will come down to 7.5 percent. The European ...
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

Gold: It is safe & secure

RETURNS ON GOLD & ITS ETF’s RISE WHILE most of the popular asset classes are going through bad times, the yellow metal shines on. In fact, in the last one year, gold has given a return of more than 25% and currently trades at Rs 14,695 per 10 gm. Even gold exchange traded funds ( ETFs ) have appreciated substantially. Gold Gold Benchmark Exchange Traded Scheme ( BeES ) and Kotak Gold ETF have given more than 25% returns each in the last three months. Even as the equity markets have taken a hit with the Sensex losing around 46% in the last one year and real estate prices also witness a correction, investors’ preference has shifted to safe havens such as gold. On an average, most of the diversified equity mutual funds have fallen and real estate developers are offering discounts. Thus gold remains the safest bet. The appreciation in the gold prices is mainly due to its safe haven status. The key reason for gold to go up is lack of other investment opportunity. There is also a risk in...
Read more

Alpha - The relative performance

Alpha, the net performance of a component against the benchmark is an overlooked tool   Absolutely speaking, any bounce back now on markets should be the last for the year. We offcourse can be wrong and prefer to be judged on alpha (relative performance) as relative accountability is fine with us. According to Alpha India, the top outperformers in the weeks ahead should be Reliance Communications, Reliance Infrastructure, SBI, HDFC, ONGC, Larsen, Jaiprakash Associates, Maruti, Bharti and DLF. On the short side (reduce side), we have Ranbaxy, ACC, Sail, Tata Steel, Wipro, Tata Motors, Sun Pharma, TCS, M&M and Infosys.   Performance like everything follows the 80-20 rule, 80 per cent of your gains are going to come from 20 per cent of your portfolio. So why not give it a thought? The importance of alpha If alpha was so important, then why don ' t newspapers and websites publish it? Why alpha gets featured annually but not as intraday or daily event? Why don ' t we c...
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