Ok, so let’s start with why you should get a credit card, regardless of how you’re making money. A credit card has a myriad of benefits, the most important being building a credit history. This credit history can come in handy at various points through life - as you apply for loans for various financial goals. Things such as education and home loans. Or an auto loan. Even a personal loan. All of these require a solid credit history to prove your worth as a borrower - and in turn, you can get better terms when you apply for loans. Credit cards also have a host of other benefits - such as a free credit period, dispute management, and rewards and offers, which you can see here.

Alright, now that that’s out of the way, let’s talk about getting a credit card as someone who doesn’t have consistent income. Typically, banks and credit card providers look at your payslips which only salaried professionals have. As a freelancer, you may be working on different projects throughout the year, with unpredictable income patterns. Drum roll - here’s how you can get a credit card, build those reward points and credit history, and generally continue adding to your boss status as a self-employed woman.

Apply for a fixed-deposit backed credit card.

An FD-backed credit card is one that is secured by your FD at the bank. What this means is that your credit card approval and limit is tied to your FD (which is held as collateral). It’s the bank’s way of managing risk. In the case that you don’t pay back your credit card bills, the bank can clear the dues using the FD. The credit limit is typically a percentage (75-85%) of your FD balance.

Do you continue to earn interest on the FD that is backing your card?

Yes, you do!

Does an FD-backed card help build your credit score?

Yup! If you use the card responsibly - i.e., pay your outstanding bills on time and not use too much of your credit limit every cycle (the recommended utilisation is 30%, so if you have a 1L monthly limit, don’t spend more than 30k on that card for the month), you can build a healthy credit score which will come in handy as you go along!

How do I increase my credit limit?

You can increase the amount in your FD which in turn will increase your credit limit on your card.

What about rewards?

These FD backed credit cards work like regular credit cards in terms of rewards, perks and offers. Sweet deal!

What happens if I withdraw money from the FD?

This will impact your credit card status, since your card is linked to the FD. If you ever need to withdraw money from the FD, you may need to cancel the card. This sucks, but can be avoided if you plan your cash flows and keep a separate emergency fund so you don’t need to touch the FD! PS: this FD-backed card can also be a way for anyone without prior credit history or consistent income to get into the world of credit cards. No more FOMO!

Questions? Ask away in the Basis community!