Posted on: June 6, 2024 Posted by: admin Comments: 0
Guide to Building Credit With Secured Credit Cards in India

Secured credit cards are an excellent tool for individuals looking to build or rebuild their credit scores. Unlike regular credit cards, secured credit cards require a cash deposit as collateral, which acts as your credit limit. This article will explore everything you need to know about secured credit cards in India, including how they work, their benefits, and tips for using them effectively.

What Are Secured Credit Cards?

Secured credit cards are a type of credit card that requires the cardholder to provide a cash deposit as security. This deposit typically determines the credit limit on the card. These cards are designed for people with no credit history or those who need to rebuild their credit due to past financial issues.

How Do They Work Differently from Regular Credit Cards?

Secured credit cards function similarly to regular credit cards in terms of usage. The key difference lies in the requirement for a security deposit, which mitigates the risk for the issuer. While regular credit cards offer a line of credit based on the applicant’s creditworthiness, secured cards rely on the deposit as collateral, making them more accessible to individuals with poor or no credit history.

Advice on Using Secured Cards Wisely

To make the most of a secured credit card, follow these best practices:

  • Pay Bills on Time: Timely payments are crucial for building a positive credit history.
  • Keep Balances Low: Maintain a low credit utilization ratio (below 30% of your credit limit) to improve your credit score.
  • Monitor Your Credit Report: Regularly check your credit report to track your progress and correct any errors.

How To Build Credit With a Secured Credit Card?

Using a secured credit card responsibly can help you build credit over time. Make small, manageable purchases and pay off the balance in full each month. Consistent, responsible use will be reported to credit bureaus, gradually improving your credit score. Here are some detailed steps and tips to help you maximize the credit-building potential of your secured credit card:

Make Small, Manageable Purchases

To start building credit, use your secured credit card for small, everyday purchases. This could include groceries, fuel, or utility bills. Avoid the temptation to use your card for large expenses that you might struggle to pay off.

Pay Off the Balance in Full Each Month

Paying off your balance in full every month is crucial. This practice not only avoids interest charges but also demonstrates to credit bureaus that you can manage credit responsibly. It helps establish a positive payment history, which is a significant factor in your credit score.

Keep Your Credit Utilization Low

Credit utilization refers to the percentage of your credit limit that you use. It is recommended to keep this ratio below 30%. For example, if your credit limit is ₹10,000, try to keep your balance below ₹3,000 at any given time. High credit utilization can negatively impact your credit score.

Monitor Your Credit Report

Regularly check your credit report to track your progress. Look for errors or discrepancies and report them to the credit bureau immediately. Monitoring your credit report helps you stay aware of your credit status and ensure that your efforts are accurately reflected.

Set Up Payment Reminders

Missing a payment can significantly harm your credit score. Set up payment reminders or automatic payments to ensure you never miss a due date. Most banks offer these services through their online banking platforms or mobile apps.

Avoid Applying for Multiple Credit Cards

Each application for a new credit card results in a hard inquiry on your credit report, which can temporarily lower your credit score. Focus on using your secured credit card responsibly before considering additional credit cards.

Maintain a Long Credit History

The length of your credit history plays a role in your credit score. Keep your secured credit card account open, even if you no longer use it as frequently. A longer credit history generally results in a better credit score.

Utilize Tools and Resources

Take advantage of financial management tools and resources offered by your bank or third-party services. These can include budgeting apps, credit score trackers, and educational materials that provide tips on managing credit effectively.

Gradually Increase Your Credit Limit

Some banks allow you to increase your credit limit by adding to your security deposit. A higher credit limit can improve your credit utilization ratio if you maintain the same spending habits. Check with your issuer for their specific policies on increasing your limit.

Understanding Credit Bureau Reporting

Ensure that your secured credit card issuer reports to all three major credit bureaus: TransUnion, Equifax, and Experian. This reporting is essential for building a comprehensive credit history that all potential lenders can see.

Building Credit Takes Time

Be patient and consistent. Building a good credit score with a secured credit card is a gradual process. Over time, with responsible use, your credit score will improve, opening up opportunities for better financial products in the future.

Educational Programs

Some credit card issuers offer educational programs and resources to help cardholders understand credit management better. Participating in these programs can provide valuable insights and strategies for effectively building and maintaining good credit.

By following these strategies and maintaining disciplined financial habits, you can effectively build your credit with a secured credit card. A strong credit score will eventually lead to better financial opportunities, such as lower interest rates on loans and eligibility for premium credit cards.

How Much Will a Secured Credit Card Raise My Score?

The impact on your credit score depends on several factors, including your overall credit profile and how responsibly you use the card. Typically, you can see improvements in your credit score within six months to a year of consistent, responsible use.

How Many Secured Cards Should I Have To Build Credit?

One secured credit card is often sufficient to start building credit. Focus on using it responsibly before considering additional cards. Having multiple cards can complicate managing payments and might negatively impact your credit score if not handled properly.

Must read: Understanding Add-On Cards in Credit Cards

Pros of Secured Credit Cards

  • Accessible to Low Credit Scores: Easier approval for individuals with poor or no credit history.
  • Credit Building Tool: Helps in establishing or rebuilding credit.
  • Similar Benefits: Offers many of the same benefits as regular credit cards, such as rewards and purchase protection.

Cons of Secured Credit Cards

  • Security Deposit Required: Requires an upfront deposit, which can be a financial barrier for some.
  • Lower Credit Limits: Typically offer lower credit limits compared to unsecured cards.
  • Potential Fees: May come with higher fees and interest rates.

Who Should Consider a Secured Card?

Secured credit cards are ideal for:

  • Credit Builders: Individuals with no credit history.
  • Credit Rebuilders: Those looking to improve their credit score after financial setbacks.
  • Young Adults: New to credit and looking to establish a credit history.

Is a Secured Credit Card Right for Me?

If you have a poor or limited credit history and are willing to make a security deposit, a secured credit card can be a beneficial tool. Assess your financial situation and credit goals to determine if this option aligns with your needs.

Unsecured vs. Secured Credit Cards

  • Unsecured Credit Cards: No deposit required, higher credit limits, and typically better rewards. Requires good credit history for approval.
  • Secured Credit Cards: Requires a security deposit, lower credit limits, and fewer rewards. Easier approval for those with poor or no credit history.

When to Upgrade to an Unsecured Credit Card?

Consider upgrading to an unsecured credit card when:

  • Improved Credit Score: Your credit score has improved significantly.
  • Good Payment History: You have a consistent record of on-time payments.
  • Low Credit Utilization: You maintain a low credit utilization ratio.

When Will I Qualify for an Unsecured Credit Card?

You may qualify for an unsecured credit card after demonstrating responsible use of your secured card for at least six months to a year. Improved credit scores and positive payment history will increase your chances of approval.


Can you get a credit increase with a secured card?

Yes, some issuers allow credit limit increases on secured cards if you demonstrate responsible usage and increase your security deposit.

What is the best way to use a secured credit card?

Use it for small, regular purchases and pay off the balance in full each month to build a positive credit history.

What should one be careful about after getting a secured credit card?

Be cautious of high fees and interest rates. Avoid maxing out your card and always make timely payments.

Can you upgrade a secured card to an unsecured one?

Yes, many issuers offer the option to upgrade to an unsecured card after a period of responsible use.

Should you keep balance low in secured credit card?

Yes, keeping your balance low relative to your credit limit helps maintain a healthy credit utilization ratio, which is beneficial for your credit score.

How Much Should I Use My Secured Credit Card to Build Credit?

Aim to use no more than 30% of your credit limit at any given time. This shows lenders that you can manage credit responsibly without maxing out your available credit.

How Long Does It Take To Build Credit With a Secured Credit Card?

Building credit with a secured credit card usually takes about six months to a year of responsible usage. However, this timeline can vary based on individual circumstances and the overall credit profile.

Leave a Comment