I am considering to use a credit card based on the FD for better leverage. What do you guys think about it?
Using a credit card based on a Fixed Deposit (FD) to trade the stock markets is generally not recommended due to the significant risks involved. Here are several reasons why:
- High Risk: Trading the stock markets involves inherent risks, including the potential for loss of capital. Using borrowed funds, such as credit card debt, to finance trading magnifies these risks and can lead to substantial losses.
- Interest Charges: Credit card debt typically carries high-interest rates, often much higher than the returns you might expect from stock market investments. Carrying a balance on a credit card can quickly accumulate interest charges, potentially eroding any gains from trading and leading to financial difficulties.
- Market Volatility: The stock markets are subject to volatility, which can result in rapid fluctuations in the value of investments. Using borrowed funds to trade amplifies the impact of market volatility and increases the likelihood of significant losses.
- Emotional Decision-Making: Trading with borrowed funds can lead to emotional decision-making and impulsive trading behavior, as the pressure to repay the debt may influence your trading decisions. Emotional trading can result in poor investment choices and further losses.
- Credit Score Impact: Failing to repay credit card debt on time can negatively impact your credit score and financial standing, making it more challenging to obtain credit in the future and potentially affecting other aspects of your financial life.
Instead of using borrowed funds to trade the stock markets, it’s advisable to focus on building a solid financial foundation, including saving and investing within your means, managing risk appropriately, and avoiding high-cost debt. Consider developing a disciplined investment strategy based on your financial goals, risk tolerance, and time horizon, and consider seeking guidance from a qualified financial advisor to help you make informed decisions about your investments.
@Venkatramanan You can look at IDFC FIRST Bank Wow Credit card which is a FD backed product. I have been using it for sometime and here’s my review:
(1) Good points accumulating card which you redeem for cash. No minimum points required.
(2) Got at an extremely low interest rate of 10% p.a.
(3) Occasionally I get great offers from Swiggy and Zomato.
If you do ₹50k+ FD then they might give you additional perks too. Be sure to talk to the agent and ask all things before signing up.
I already have one(HDFC Moneyback +), but I would like to minimize my expenses and to save at the same time. I also recently came across Onecard Credit Card which is a FD backed card that has some exciting offers on almost all the ecommerce platforms I use for purchase.
@itsadam Thanks for your reply. I looked into it, but I think it is a good one for bike riders. And you mean they give the FD interest yield is 10% p.a???
@entice I also have a normal one, but I just wanted to know whether it is a good investment option with additional benefits
Hi, why put lien on an FD when you can get credit card without collateral, especially if you already have one?
Credit card tends to increase expenses rather than decrease. Fd against OD is another thing.
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@Rathi Thank you. So from your point of view, you think that FD backed cards are not a good investment options?
If I’m not wrong, FD against credit card never been an investment option.
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@Rathi I too thought the same first, but please have a look at Onecard Credit card. It kinda confused me😅
I have normal credit card, my limit over years increased exponentially.
Never missed payments, good cibil etc
I’m wondering, but i don’t think FD backed cards increase credit limit in the same way.
If you get normal card, all spends gain that much on idle cash at savings rate
Even with FD card, what you are saving is actual idle cash at savings rate bcos you have to pay bill every cycle.
While spending, even 1000/- a month gains in savings rate p.a, i think spending under 20K a month wouldn’t make much diff.
20k bill p.m for is 20k p.a at 3.5%p.a like 700 inr. a year
I just consider this adjustment for sms/imps/debit card fee etc etc 
bcos i have multiple Bank acs
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It is not a good idea at all to use credit card for investments, solely because the interest charged in case you do not pay 100% on the due date is very high.
If you truly want flexibility, instead of credit card, get an OD against the FD. In this case, you can use the OD as and when needed and repay it as well. The limit will be available and interest rate will be max 2% over fD rate and charged on a p.a basis. Also interest is charged for the amount utilised and for the specific number of days.
Not recommending that you should use borrowed money for investing in shares, but it is defenetly a no no if you are thinking of using credit card limit.
Credit card is great for POS purchases only. Use it deligently and repay it 100% on the due date. You get free credit period of 55 days Max and you gain on points etc. But never draw cash from credit card.
These are my personal views.
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Are you sure it is 10% pa
Banks offer Overdrafts and loans at 2% over FD rate or if you negotiate 1%. Current FD rate at IDFC is around 7.75 (highest) so it will be 9.75%. The standard OD, How come they are offering interest on unpaid outstanding at 10% pa.
Just a thought, you could be right as well. Just check once again.
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@neha1101 You don’t have to believe me. Please feel free to counter verify on the website or talk to a sales rep.
@Venkatramanan No 10% is the ARR on outstanding balance. You might or might not get it at 10% because that depends on your Cibil and your relationship with the bank.
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See the various examples.
If u fail to pay the minimum amount there is a late payment charge plus interest from the date of transaction
The illustration never speaks about 9 its in the range of 36 to 42 percent
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@neha1101 Here’s screenshots for you. I don’t need to prove anything to you but since you’re unaware, these might help.
There are customers who did some FD of a good sum and even got 9% ARR a couple of months back.
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I’m totally confused by replies to the questions asked.
@Dorkstar1 Since when did Brokers have started allowing trading in stock market for credit card holders?
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