Secured credit cards: how fixed deposits unlock approvals

For many young professionals, getting a credit card is harder than expected. Banks often reject applications because of low salary, lack of credit history, or unstable employment.

That’s where secured credit cards come in. Instead of relying on your income or credit score, these cards use your fixed deposit as security.

In simple terms: you place money in a fixed deposit with the bank, and in return, they issue you a credit card with a limit tied to that deposit. This arrangement opens doors for beginners and helps build a positive credit history.

What is a secured credit card?

A secured credit card looks and works like a normal credit card—you can shop online, pay bills, and swipe at stores. The difference is in how the bank approves it. Instead of analyzing your credit score or high salary, they require you to make a fixed deposit (FD).

• Example: You deposit AED 5,000 as a fixed deposit. The bank issues you a secured credit card with a limit of around AED 4,000–5,000.
  
• The deposit acts as collateral. If you don’t pay your bill, the bank can recover the money from your FD.

Because of this safety net, secured cards are much easier to get approved for compared to standard credit cards.

How fixed deposits unlock approvals

Fixed deposits are low-risk for banks. They know the money is already in their system, so they are more comfortable giving you a credit card, even if you have no credit history or a low salary.

Here’s how the process typically works:

1. Open a fixed deposit: You choose the amount you want to deposit, usually starting from AED 3,000 to AED 5,000.
   
2. Apply for the secured card: The bank approves it quickly, since the deposit guarantees repayment.
   
3. Get a credit limit: Usually 80% to 100% of your deposit.
   
4. Use like a normal card: Every swipe, bill, or online payment works exactly like with a standard credit card.
   
5. Build credit: As you pay your bills on time, your credit history improves.
   

This system turns your savings into a stepping stone for financial independence.

Benefits of secured credit cards

For beginners, secured credit cards come with several advantages:

• Easier Approval: No long salary or credit history checks.
• Credit Building: Timely payments help you build a solid credit score, making it easier to qualify for unsecured cards later.
• Safe for Banks: Since the deposit covers the risk, banks are more willing to issue the card.
• Spending Control: Your limit is tied to your deposit, reducing the risk of overspending.
• Normal Card Features: You can enjoy rewards, online transactions, and sometimes even cashback.

For example: Imagine Ahmed, a new graduate earning AED 4,000 monthly. He can’t get a regular credit card yet, but by placing AED 5,000 as a fixed deposit, he receives a secured card with a AED 4,000 limit.

He uses it for groceries and online shopping, pays on time, and after a year, his improved credit score allows him to upgrade to a standard card.

Drawbacks to keep in mind

While secured credit cards are helpful, they also have limitations:

• Blocked Funds: Your fixed deposit is locked while the card is active. You can’t freely use that money.
• Lower Rewards: Some secured cards don’t offer as many perks as premium cards
• Credit Limit Restriction: Your spending power depends on the size of your deposit.
• Annual Fees: A few banks still charge annual or monthly fees. Always check the terms.

Secured vs unsecured credit cards: what’s the difference?

Think of secured cards as training wheels for your financial journey. Once you learn to ride safely, you can move on to unsecured cards with higher limits and better perks.

Who should consider a secured credit card?

Secured cards are ideal for:

• Students and fresh graduates who have no credit history.
• Expatriates who are new in the UAE and don’t meet salary requirements yet.
• Low-income workers earning below AED 5,000.
• Anyone with past credit issues looking to rebuild their score.

If you fall into one of these categories, a secured card can be your gateway to mainstream financial products.

Tips for using a secured credit card wisely

1. Always pay on time: This is your chance to prove financial responsibility.
2. Keep utilization low: Don’t max out your card. Using 30%–40% of your limit is ideal.
3. Avoid unnecessary fees: Pay in full to avoid interest.
4. Check if the deposit earns interest: Some banks allow your fixed deposit to continue generating returns.
5. Plan for the future: After 12–18 months of good usage, apply for an unsecured card.

Final thoughts on secured credit cards

Secured credit cards are the simplest way for beginners to step into the world of credit. By using a fixed deposit as collateral, you unlock easy approval, gain access to card features, and start building a positive credit history.

While your funds remain locked, the long-term benefits—better credit score, higher chances of approval for premium cards, and more financial freedom—make it worth considering.

For anyone starting out in the UAE or elsewhere, a secured credit card is more than just plastic; it’s a bridge to financial growth.