In a groundbreaking move toward financial inclusion, ZET, in collaboration with SBM Bank, recently introduced the Magnet FD Credit Card. This secured credit card has caught the attention of New-to-Credit (NTC) customers, a demographic crucial for India’s evolving credit landscape. In this in-depth analysis, we’ll explore the growing demand for Magnet, its significance for NTC customers, and its broader impact on financial markets. We’ll also assess how it is helping individuals build or repair their credit scores, while offering financial benefits through fixed deposits.
1. The Rise of Secured Credit Cards: A Solution for NTC Customers
The Magnet FD Credit Card stands out in a market where financial inclusion is becoming increasingly critical. Secured credit cards like Magnet are backed by a fixed deposit (FD), reducing the lender’s risk while giving users access to credit. What makes Magnet unique is its focus on NTC customers—those who are new to the credit system or have limited credit histories.
NTC customers account for around 25% of Magnet’s user base, a significant share considering the challenges this group faces in accessing traditional credit products. With no established credit history, NTC customers often struggle to qualify for unsecured credit cards, making secured options like Magnet an attractive alternative.
According to ZET’s data, 55% of these NTC customers fall within the 18-25 age group, indicating a strong appeal to younger consumers who are eager to build their creditworthiness. Additionally, if the age bracket is extended to 18-35 years, 85% of Magnet’s user base falls within this range, with an average user age of 28.
This trend suggests that young adults are actively seeking ways to improve their financial standing and are drawn to the benefits and security offered by the Magnet FD Credit Card. This aligns with India’s larger push toward financial inclusion, especially as the Reserve Bank of India (RBI) continues to encourage responsible lending practices.
2. Magnet FD Credit Card: Bridging the Gap for Low Credit Score Holders
Magnet isn’t just appealing to NTC customers but also to individuals with poor credit histories. ZET revealed that 81% of Magnet users had a credit score of 650 or lower, underscoring the card’s relevance for those looking to rebuild their financial profiles.
As secured credit cards are backed by an FD, Magnet ensures a 100% approval rate for users, unlike traditional unsecured credit cards, which often reject applicants with low credit scores. This card helps users improve their CIBIL scores, offering a second chance to those with limited access to financial products.
By offering the Magnet FD Credit Card, ZET and SBM Bank have tapped into a growing market segment that is typically underserved by traditional financial institutions. The ability to build credit responsibly while enjoying the benefits of a standard credit card makes Magnet a unique offering in the Indian market.
3. Hyderabad Leads the Demand for Magnet FD Credit Cards
Geographically, the demand for the Magnet FD Credit Card has been highest in Hyderabad, followed by Bengaluru and Jaipur. This trend provides valuable insights into regional financial behavior and suggests that residents of Tier-2 cities are actively embracing secured credit products.
The preference for Magnet in Hyderabad can be attributed to the city’s expanding middle class and tech-savvy youth population. Hyderabad’s rapid urbanization and the presence of several educational institutions also contribute to the high demand for financial products among young professionals and students.
Following Hyderabad, Bengaluru has emerged as another major market for Magnet. Bengaluru, known for its startup culture and tech industry, is home to a large population of young professionals who are eager to establish their financial independence. The availability of secured credit cards like Magnet appeals to this demographic, many of whom are either new to credit or looking to build a better credit score.
Jaipur, a Tier-2 city with a burgeoning economy, rounds out the top three cities where Magnet FD Credit Cards are in high demand. Jaipur’s increasing economic development, combined with growing financial literacy, has spurred the adoption of products like Magnet, which provide easy access to credit and financial security.
Other cities such as Kolkata, Lucknow, New Delhi, and Mumbai also see considerable demand for Magnet, reflecting the growing appetite for secured financial products across India’s urban landscape.
4. Secured Credit Cards Gaining Popularity Amid RBI Regulations
The surge in secured credit card demand, such as Magnet, can be traced back to the RBI’s decision to increase the risk weightage on unsecured credit cards. This regulatory shift has pushed consumers toward more secure alternatives, leading to the issuance of almost 100,000 secured credit cards every month.
For lenders, secured credit cards offer reduced risk, making it easier for them to approve applications. For consumers, particularly those with poor or no credit history, secured cards like Magnet offer an opportunity to access credit and enjoy benefits similar to unsecured credit cards.
Manish Shara, Co-Founder and CEO of ZET, emphasized the growing popularity of secured credit cards, stating, “The popularity of secured credit cards as a CIBIL builder product is increasing fast among NTC customers. Magnet not only stands as a catalyst for aiding NTC customers but also for those with poor credit history in accessing easy credit products.”
The ability to offer guaranteed approval, backed by a fixed deposit, has made secured credit cards an appealing option for millions of Indian consumers. The Magnet FD Credit Card, in particular, has gained traction due to its attractive features, including minimal documentation, no renewal fees, and benefits like cashback and discounts.
5. Key Features of Magnet FD Credit Card: Building Financial Health
Magnet’s proposition goes beyond just offering a secured credit card; it combines multiple benefits aimed at improving users’ financial health:
- Minimal Investment: Magnet requires a minimum FD of ₹5,000, going up to ₹25,000. The FD is insured up to ₹5 lakh by the Deposit Insurance and Credit Guarantee Corporation (DICGC), ensuring the user’s money is safe.
- Credit Limit: Users enjoy a credit limit equivalent to 90% of the FD value, allowing them to access credit without worrying about overspending.
- Interest Benefits: Users earn up to 7% interest on their FDs, making Magnet not just a credit-building tool but also a vehicle for financial savings.
- Lifetime Free Card: Unlike many credit cards that come with steep renewal fees, Magnet is a lifetime-free card. This affordability factor is especially appealing to young adults and NTC customers.
- Reward Programs: Magnet users can enjoy joining benefits worth ₹21,000+, including OTT subscriptions to platforms like Disney Hotstar, Sony LIV, and Zee5. Additionally, they can earn up to 10% rewards on purchases from leading brands like Amazon, Flipkart, and Myntra.
- Easy Application Process: Magnet offers guaranteed issuance without requiring extensive documentation, making it a highly accessible product for those in Tier-2 and Tier-3 cities.
These features ensure that users not only improve their credit scores but also benefit financially through interest on FDs and exclusive rewards.
6. Financial Inclusion and the Path Forward
ZET’s Magnet FD Credit Card is a significant step forward in promoting financial inclusion in India, especially for those who have traditionally been excluded from the formal financial system. By providing NTC customers and low credit score holders with a secure way to access credit, ZET is playing a pivotal role in helping millions of Indians build a credit history.
The card’s popularity among younger demographics highlights a growing awareness of the importance of financial planning and credit building from an early age. With India’s burgeoning youth population, products like Magnet have the potential to shape the financial habits of an entire generation.
As demand for secured credit cards continues to rise, the financial landscape in India is likely to witness further innovation. Lenders are increasingly recognizing the potential of NTC customers and those with low credit scores, resulting in the development of new products designed to meet their unique needs.
Conclusion: Magnet FD Credit Card and India’s Financial Future
The introduction of the Magnet FD Credit Card by ZET and SBM Bank marks a pivotal moment in India’s journey toward financial inclusion. With 25% of users being NTC customers, Magnet is not only empowering individuals to build credit but also offering a lifeline to those with poor credit histories. The card’s popularity among younger demographics and its guaranteed approval process, backed by an FD, make it a standout offering in the Indian credit market.
As more individuals turn to secured credit cards in response to RBI regulations and personal financial needs, products like Magnet are poised to play a crucial role in shaping the future of India’s credit ecosystem. With financial inclusion at its core, ZET’s Magnet FD Credit Card is leading the charge in democratizing credit access for all.
