If you don't have a credit history, banks are generally reluctant to offer you a credit card even if you are salaried. For self-employed, it is all the more difficult to get a credit card as they don't have regular cash flow. Indeed, if you need credit of any kind, you need to have a credit history. But without any credit how can you have a credit history? So it's a catch 22 like situation for many people.
Therefore, to help such customers and increase the credit card penetration in India, State Bank of India's (SBI) subsidiary SBI Card has come out with a credit card "Unnati" which will be available to all SBI customers provided they have a minimum deposit of Rs 25,000 with the bank. Any SBI customer, including Jan Dhan account holders, with or without any credit history, can apply for the card.
A person will be allowed to take a credit of up to 80 per cent of the value of the fixed deposit up to a maximum limit of Rs 5 lakh. You can't use this fixed deposit till you are using the card. The bank will break into your fixed deposit in case you default on credit card payment. Vijay Jasuja, CEO of SBI Card, said at the time of the launch that after the person has used the card for a year and has build enough credit history, the requirement of minimum deposit will also be waived off.
Apart from this the card will be available free of cost for the first four years. "After that if the customers spends a minimum amount which won't be very high, the card will continue to be free otherwise a fees will be charged," said Jasuja, of SBI Card.
Should you go for it?
The card is a good offering , although it may not be the first of its kind as other banks do offer secured credit card, where credit card is issued against a fixed deposit, but the waiver of fee is a big attraction. "The condition stipulating a minimum fixed deposit of Rs 25,000 to get Unnati Credit card is not unique as Solaris Credit Card offered by Kotak Mahindra Bank (ING Vysya) also has the same condition. The amount of fixed deposit can vary from one bank to bank. DCB bank also offers credit card against Rs 15,000 deposit. ICICI Bank also has such a product, " says Rishi Mehra, CEO of Wishfin.com.
"However, the uniqueness of the offer comes with the waiver of annual fees ( Rs 499) for the first 4 years. There is no surety on the waiver of the annual fee in the case of other FD-backed cards. The annual fee waiver is thus a differentiator for Unnati, which could help it stand out from the rest," he added.
Plus, it will also help people without any credit history to build one which will further help them take other loans in future. "If you don't have a credit card because of credit history and you need one do go for it. It will also help you in taking other loans like home loan and car loans in future," Mehra said.
"Unnati is a great product offering, especially for those without a credit history. Existing SBI customers, especially those from low income groups would benefit from it the most. It's a great opportunity for them to build a solid credit record by using the Unnati credit card sensibly and get included in the organised financial segment," said Naveen Kukreja, CEO & Co-founder, Paisabazaar.com.