Secured Credit Cards
A secured credit card is a valuable tool for Canadians to either start building credit, or to breathe new life into their credit history. We have compared the best secured credit cards in Canada to help find what card best suits your financial needs.
Rate, annual rewards estimate and other product information are subject to change at any time and does not constitute financial advice. Please contact supplier for complete details.
The Best Secured Credit Cards in Canada
Credit cards can sometimes come with the feeling of invincibility. We live in a time where you can purchase anything, anytime ñ at the click of a button or speech command to Alexa. When faced with these temptations to spend, itís easy to charge your card and ultimately fall victim to overspending.
Whether you have no credit or bad credit ñ finding the best secured credit card can help you build your credit history.
What is a secured credit card?
Simply put, a secured credit card allows you to grow your credit history or improve your current credit score. Every secured credit card requires a security deposit to be placed on the card which can be equal to or less than the limit of the credit card. Depending on the state of your credit history, you may be required to pay a partial or full deposit.
By asking for a deposit, there is minimal risk for the lender to give you a credit card. Credit card users or borrowers with low or no credit score can be seen as a high risk to lenders.
The deposit acts as protection for the issuer, in the event you cannot pay your bill. Once you close your account ñ and on the condition you make your monthly payments on time and in full ñ your security deposit will be returned to you.
What are the features and benefits of secured credit cards?
Build your credit score. Your credit score is based on five elements:
- Your payment history
- The amount you owe
- The length of your history
- Public records (which show history of bankruptcy or collection issues)
- Inquiries into your account (this shows if your credit file has been assessed)
The only way to build your credit score is by making transactions ñ and repaying them on time.
Credit card issuers can report your payment information to the credit bureaus each month. This can give you the opportunity to build your credit history. If you use your credit card responsibly ñmake monthly payments on-time and in full ñ youíll not only see a noticeable change in your credit score, it is likely that your credit card lender will eventually offer you an unsecured credit card and return your security deposit.
Create good credit habits. A secured credit card can only help build your credit score if you show that you are a responsible borrower. This means youíll have to learn competencies such as paying your balance in full and on time every month.
Itís important to note that a late payment ñ even if itís only late by a few days ñ will undo your work toward credit repair.
Qualify for bigger things in the future. Once you are able to prove youíre a responsible borrower, your chances of qualifying for an unsecured card offered by other lenders increase. Having a good credit score will allow you to qualify for borrowing money for bigger life events such as applying for a mortgage, buying your first house and purchasing a car.
Additional extras. Every secured credit card is different. From varying credit limits to low-security deposits and rewards, make sure you evaluate all fees ñ application, processing and annual ñ and extras when comparing secured credit cards.
What causes a bad credit score?
Having a bad credit score is one thing but understanding how you got there ñ so you never do it again ñ is important. A bad credit score is caused by several factors including:
- Late payments
- Missing every payment
- Maxed out credit cards
- A charge off - this is when an issuer sees that you do not intend to make a payment on your existing balance.
- Taking out loans you canít afford
- Filing for bankruptcy
- Judgements - unpaid judgments look worse than paid judgments.
Whatís the difference between a secured credit card, a guaranteed credit card and a prepaid credit card?
On the surface, all three cards seem very similar. However, there are some distinct differences that you should consider when comparing these cards.
Similar to a secured card, a guaranteed credit card will allow you to rebuild your credit by making everyday purchases with your card ñ within your credit limit. However, you may not be required to place a security deposit.
A prepaid card is not actually a credit card, in fact itís more of a glorified gift card. Similar to a credit card it can be used with any retailer, but it has no credit limit. Once someone deposits a balance onto the card, you can only spend up to that amount. For example, you if deposit $100 onto the prepaid card, you can only spend $100. Since you deposit a balance onto the card, it does not allow you to build credit because your usage is not tracked by your issuer and reported to the credit bureau. However, there is no need for a credit check to get a prepaid card so youíll never be rejected due to a bad credit history.
Who should get a secured credit card and why?
A secured credit card is a good option for Canadians who either need to start building credit ñ such as residents who are new to Canada or never owned a credit card ñ or Canadians who need to repair their damaged credit history. Why? Lenders use secured cards to help those with poor credit to build their credit history.
What are the best Canadian secured credit cards in 2018?
Our in-house experts know how difficult it is to find the best secured credit card. Thatís why weíve reviewed the best options on the market. Some of the top cards in Canada include:
Top Features About Home Trust Secured Visa Card
- Credit limits as low as $500
- Virtually everyone is approved
- 14.90% interest rate on purchases
- A good way to establish, build or improve credit
- Guaranteed access to credit
- May help you establish or re-establish your credit history
- Security funds required
- Annual interest rate of 19.8%
- Annual fee of $59
- Build credit with Refresh's Secured Credit Card
- Easy Approval ñ as long as you are the age of majority
- Security deposit starts at $200 and goes as high as $10,000
- Low fees and interest
- All cardholders get free access to (www.refresh.fit) a Financial Education program
- An excellent opportunity to establish your credit rating
- Virtually everyone is approved
- Make purchases over the phone or online
- Plan and book a vacation
- Access cash anytime, anywhere from over 1 million ATMs around the world displaying the Visa or Plus logo
- Shop at over 24 million locations worldwide
- Earn 1% cash back with every purchase, with no limit in the amount you can earn.
- Roadside Assistance at no extra cost.
- Car Rental Collision Insurance and Purchase Security Insurance included.
- 0% foreign currency conversion charge on purchases abroad.
- No annual fee.
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