October 24, 2025 · 14 mins read
A credit card against a fixed deposit (FD) is a great way to enjoy credit card benefits without worrying about approval hassles or a low credit score. Since the FD acts as security, banks easily issue these cards to first-time users or those looking to rebuild their credit history. You can, however, want to close this card as your situation improves or when your FD matures.
Here, we guide you step-by-step on how to close a credit card against FD, the checklist to perform prior to closing, and how it affects your fixed deposit and credit score.
A credit card against a fixed deposit (FD) comes to be called a secured credit card since it gets issued against your FD as security against it. The bank typically offers a credit limit of around 75% to 90% of the deposit amount, depending on its policy. These cards are ideal for people who have no credit history, a low CIBIL score, or inconsistent income proofs, as they are easier to get approved for than unsecured credit cards.
Most people prefer this as they are able to re-establish or set their credit score and still build interest in their FD. It serves as a good supplementary credit line in case of an emergency, too. Despite that, it does need to be handled carefully as defaults still affect both your credit score and FD against it.
Even as a credit card against an FD gives you versatility and a credit builder, you will have to eventually close it. One of the most common reasons for doing that is when your fixed deposit matures or you have to withdraw or invest the amount elsewhere. Others also have a tendency to close it when they are eligible for an unsecured credit card, which does not require collateral.
Another reason could be to simplify financial management; maintaining too many cards can become confusing and lead to missing on-time payments. In some cases, the renewal or annual fees may be higher than the savings, making it more expensive. If you don't use the card anymore, then there is no real need to keep it active, and it can impact the ratio of your credit utilisation.
Closing the card properly guarantees that the FD is released safely, your dues are cleared, and your credit score is not affected at all.
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Before you begin the closure of your credit card against FD, you are advised to go through a few key facts carefully to avoid a bumpy and error-prone process.
It is essential that you verify if there is still an amount due for your EMI or a service charge that needs to be paid. Even if the outstanding balance is tiny, it can still be a delay in closing or a decrease in your credit score as a result.
If you have any rewards points, cash back, and vouchers on your credit card, then they should be redeemed before you cancel the card, as after you cancel the card, all the offers will be lost.
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Usually, people forget to remove their credit cards from OTT services, shopping platforms, or EMI schemes. Allotments for auto payments should be cancelled to avoid any failed transactions in the future.
Ask your bank whether the fixed deposit will continue to earn interest after the closure, or if it will be given up.
In case you are thinking or planning about shutting down your fixed deposit before the maturity date, check if there is a penalty you may have to pay and how much interest you will miss.
Having a written record of each confirmation helps you avoid any disputes or errors in the long run.
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It's not complicated to find a credit card that's supported against a fixed deposit. You must handle it with care to prevent any difficulty in your savings or credit history. Here's a step-by-step guide:
You should begin by calling customer care or visiting your nearest bank branch. Let them know that you are there to close your credit card linked to an FD. The employee there will explain the respective procedure and documents needed to shut down the service.
A formal closure request is typically required by most banks either in the form of a letter or through an online form. Then, in order to verify your profile, provide your name, registered mobile number, card last four digits, and FD details.
Your credit card account should have no balance. If there is an outstanding amount, pay it off before submitting the closure request. After payment is done, ask for a "No Dues Certificate" It may come in handy later on.
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When the closure request is granted, either hand over the card to your bank if it’s a physical card, or alternatively, cut it up safely in order not to be able to use it anymore.
Once you have closed the card, the bank will release the lien (lock) from your FD. The deposit can either be allowed to accrue interest to its maturity, or the amount can be withdrawn in case of need.
It is very important to request the bank for written or email confirmation that your credit card account is formally closed.
When you close your credit card against a fixed deposit, the bank releases the lien (or hold) that was placed on your FD. After that, it all depends on the way the FD was created.
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If the fixed deposit was opened mainly as security for your credit card, the bank will usually close it after the termination of the card account. The principal plus interest at the time of maturity will be transferred to your savings account.
If your FD was already there when you applied for the card, then the bank would just unclip the lien, letting the FD earn interest until maturity. Whatever you choose, it's a good idea to check the FD status through internet banking or a branch visit to know for sure that the lifting of the lien is already in effect.
The shutting down of a credit card with FD might cause a slight impact on your credit score, but if managed correctly, the impact is generally little. Due to the fact that it is a secured card, the overall credit utilisation ratio might go down a bit, which could cause a drop in your score for a short time. Nevertheless, the scoring system will not consider you taxed if you fully settle your debt before the closure and gain the guarantee of the account being reported as "Closed by Cardholder".
That's why you shouldn't close multiple cards at once, as it may lead to a decrease in your total available credit and to a shorter age of credit history. Good planning is what keeps your score stable and allows your FD to be released without any problems.
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Freezing a credit card against FD involves planning to prevent any form of monetary or credit trouble.
Build a Credit History: Ensure that you have been managing the card properly for some time, and it has gone well for you in your credit record.
Check FD Terms: make sure that if you close the card, it will not impact your FD or impose charges.
Document Everything: Closure requests, payment receipts, and communications with the bank should all be recorded.
Verify Closure Status: Make sure that your account is reported on your credit report as "Closed by Cardholder" and not as "Settled."
Monitor FD Release: Make sure that your FD lien is cancelled and the money is credited properly.
Plan Future Credit: Keep at least one credit line open to keep building your credit score.
Following these recommendations is the best way to avoid impacting your finances or credit health during the closure process.
The process of closing a credit card that is linked to a fixed deposit is simple and straightforward; however, it needs to be done with care. Following the procedure of paying the debts, verifying the status of the FD account and obtaining the necessary documents would ensure that the closure is done without your savings or credit score being impacted. Remember to redeem rewards, cancel linked subscriptions, and verify that your FD lien is released. Simple, particularly when it comes to transferring to an unsecured credit card or cashing out your FD funds. You can rest assured that, if you proceed with these instructions, closing your FD-backed credit card might be a secure, hassle-free, and prudent financial move.
A credit card against a fixed deposit (known as FD backed credit card) is a secured credit card that banks issue against a fixed deposit with them. Rather than basing it solely on income or credit history, the bank bases it on the fixed deposit as the collateral for the credit card limit. That means it’s a lot easier for people with little or no credit to get a credit card.
In India, most banks provide this facility to students, young professionals and new to credit people. Because the card is backed by a fixed deposit, risk for the lender is far smaller than with typical credit cards. Owing to this, banks are typically happy to approve the card even if the applicant doesn’t have a TransUnion CIBIL credit score.
The credit limit of such a card is typically tied to the amount of the fixed deposit. In majority of instances, banks extend credit limit up to 75% to 90% of the FD amount. For instance, if you keep a fixed deposit of ₹50,000, your credit card limit can be about ₹40,000-₹45,000 depending on the bank.
One of the biggest benefits of an FD supported credit card is that it supports build credit. When the cardholder uses the card responsibly and pays the outstanding balance on time, the bank reports this repayment behaviour to credit bureaus like TransUnion CIBIL. This, in turn, helps the cardholder build up a good credit history and credit score.
Another plus, the FD keeps earning interest while it’s collateral for the CC. So the cardholder doesn’t forfeit the investment while indulging in credit card bliss.
FD backed credit cards are also convenient for people who could have earlier been loan rejects on account of their low credit ratings. By employing this form of card judiciously, they can reconstruct their credit record and improve their likelihood of obtaining unsecured cards or loans down the line.
While FD supported credit cards are fantastic for credit building, a few people just end up shutting them down. This typically occurs when their finances prosper and a secured card is no longer required.
It is also common to close such a card in order to free up the fixed deposit. Since the FD is collateral, the bank typically holds it locked until the credit card account has closed. After the cardholder closes the card and pays off any dues, the bank frees the fixed deposit.
The other reason is that so many folks migrate to plain old unsecured cards once they establish decent credit. After establishing a good credit history with agencies like TransUnion CIBIL, banks may provide regular credit cards with no collateral. These cards usually have better rewards and higher limits and benefits.
Other cardholders shut down FD backed credit cards because they crave simplicity in their finances. It can also become a hassle to deal with multiple credit cards, if your secured card no longer provides you with any real benefit.
Sometimes, people close these cards because they need to use the FD for other financial objectives. E.g., they may be for education, medical care, a home purchase or an investment opportunity. Because the FD is linked to the credit card, shutting down the card lets you pick up the deposit.
But do shut the card with care. Before asking to close, the cardholder should clear all payments. When the account is closed, the bank changes the status in the credit report with TransUnion CIBIL.
Even closing an FD backed credit card doesn’t necessarily hurt the credit score assuming the account was kept in good standing. Moreover, if the cardholder already maintains other open credit lines and a solid history of on-time repayments, the effect is often negligible.
On the whole, FD supported credit cards are great for building credit in India. They offer a secure foothold into the credit world to those who can’t otherwise access credit cards. Though most folks ditch these cards once they’ve established a stronger credit profile, they can serve an important purpose in laying a firm foundation.
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Yes, you may do so at any time after you have settled all your outstanding dues and sent a written request for the closure to your bank.
If the FD was created only for the card, then the bank can close it and transfer the money to your savings account. Otherwise, it will remain until the maturity date.
There is no penalty for the card being closed, but if the FD is closed before maturity, a small penalty may be deducted from the interest by the bank.
It normally takes around 3 to 7 business days, starting from when you pay the dues and hand in all the documents.
It will have a slight impact, but not a major one, especially if you do it after paying all dues and keeping other active credit lines.
Absolutely, you have the option to reapply at any time, either by creating a new FD or by using an old one as collateral.
The closing of the card results in the loss of all the unused reward points or cash back rewards; therefore, redeem them early to avoid this.
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