Now, Get a Credit Card against Your Gold Jewellery

You have heard of gold loans. You reach out to a bank or NBFC, pledge your gold/gold jewellery, and the bank sanctions you a loan. However, have you heard of a gold-backed credit card? I had not until I read about a gold backed credit card from Rupeek.

How does it work? Simple. You pledge your gold and the bank/NBFC issues you a credit card.

How Is a Gold Backed Credit Card Different from a Gold Loan?

A gold loan is a one-time facility. You take out a loan and repay the loan over the next few months or years. That’s it.

On the other hand, a gold backed credit card is a revolving facility, like a credit card or an overdraft facility. You spend on the card and the credit limit goes down. You repay the amount, and the credit limit goes back up again. Just like a credit card.

A gold loan does not offer interest-free credit period. A credit card offers interest-free credit for up to 45 days.

Salient Points about Rupeek’s Gold-Backed Credit Card

  • It is a Rupay card. Hence, you can use the card on any website/establishments that accept Rupay cards.
  • You get credit limit of 75% of the pledged gold’s value. This is in line with Loan to value (LTV) for gold loans. If the Reserve bank were to reduce the LTV for gold loans, the LTV will be adjusted accordingly.
  • The maximum credit limit is Rs 50 lacs.
  • You get interest-free credit period, just like any other credit card.
  • If you do not pay the dues within 37-45 days, you must pay interest charges at the rate of 2.5% per month. APR of 30%. This is comparable to APR of regular credit cards. On the other hand, the interest rate of gold loans is usually lower, ranges from 12% to 24% p.a. However, gold loans do not provide interest-free credit period and are one-time credit.
  • The cardholders can withdraw up to 100% of the credit limit into their bank accounts. The issuer charges a processing fee of 1%. You can withdraw cash (not transfer to bank accounts) from regular credit cards too but the charges are much higher.
  • No application fee or renewal fee.
  • You can take back the gold jewellery temporarily from the card issuer to attend a function or any other reason. In such cases, your credit limit will be adjusted accordingly.
  • Your gold is stored in the nearest value of a partner bank (as per lender website).
  • 1 reward point for every Rs 200 spent. No clarity about the value/conversion rate of a reward point.

How to Apply for Rupeek Gold Credit Card?

  1. Install Rupeek app and apply for the card.
  2. Rupeek executive will visit your house to finish KYC and value gold.
  3. Your gold will be pledged and stored in vaults.
  4. You get the gold backed credit card.

Should You Apply for Rupeek’s Gold Credit Card?

If you can get a regular (unsecured) credit card, I see little merit in going for gold backed credit card. Why go through all the hassle?

If you do not have a satisfactory credit score and are finding it difficult to get a regular credit card, you can apply for such gold-backed credit cards or any other secured credit card.

A secured credit card is a good way to build credit history. Since the credit is secured by a liquid security such as a bank FD or gold (in this case), the banks/NBFCs do not have to focus on your credit history and are comfortable extending a loan or a credit card.

Always remember. Getting a credit card is one part. You must use the card responsibly too. Irresponsible usage can land you in serious trouble. Moreover, credit cards are better suited for mitigating short-term cash flow mismatch. For any purchases where you need a greater breathing space (longer repayment tenure), you are better off taking a loan (and not a credit card). Credit card interest will bury you in debt.

What do you say? Do you see any merit in a gold backed credit card?

Disclaimer: I did not find any information about this credit card product on Rupeek’s website. I did not download Rupeek’s mobile app or try to apply for the loan either.  I have relied on the information/articles available on the third-party websites for this post. Before applying and pledging your gold, do your due diligence about Rupeek.

Source/Additional Reading

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