Secured Credit Cards for Canada
- Plastk Secured Card – best for new cardholders who want to get 0% APR for 3 months, bonus points, and Zero Fraud Liability. More about Plastk Secured Visa.
- Neo Secured Card – best for those who are interested in having no annual fee card and earning cash back rewards while building a credit score. Learn more about Neo Card Secured Mastercard.
- Refresh Financial Card – best for people who want to have a card that reports to both Credit Bureaus and has low fees. Learn more about Refresh Secured Visa Card.
What Are Secured Credit Cards?
Secured credit cards are cards that can help you build your credit score. These cards need to have a balance at all times; if you don’t pay your bills on time, your card issuer can take the money from your secured card.
Secured credit cards can be used as regular credit cards. You can make purchases and build your credit score. However, you need to ensure that you will pay the money back to the issuer, which is why you need to deposit money before you spend it. These cards are usually issued to those who need to work on their credit score1. That may include beginners or those who didn’t quite manage to keep their credit scores high. Let’s take a look at how these cards function.
Secure Cards and Deposit
With unsecured credit cards, you can spend a certain amount of money during the month and pay that amount back at the end of the month. There is no need to deposit any money beforehand – you can spend it freely and pay it back later. On the other hand, with secured cards, you first need to make a deposit which will serve as a protective factor for your card issuer. Additionally, you can only spend the amount you deposit into your bank account.
For example, if you deposit $300, you can only spend that much during the month and have to pay it back later. However, this way, you can build your credit score. Once you build your credit enough, you will be eligible to apply for a regular credit card.
To build your credit, you should use a secured card every month. Credit building is fairly straightforward – every purchase you make with a credit card is noted and affects your credit score. The better your score, the better your options will be. A secured card is mainly used to rebuild credit or start from scratch. There are a few steps you can take to build your credit better by using a secured credit card.
For example, you should always pay back the money you have spent during that month. Additionally, you shouldn’t let the issuer take your balance away because it may affect your score. Make sure you pay back each month and watch your credit score grow. Another thing you should do is keep track of your credit score. Once your credit score has significantly improved and you have good credit, you should ask your issuer for an unsecured card. With this card, you can build your credit even more, but you need to use it responsibly.
Secured Credit Card Fees
Having a credit card, in general, might require you to pay an annual fee – this is also the case with secured credit cards. Namely, you can get a secured card and pay an annual fee (up to $50), but some banks are fee-free. When it comes to secured credit cards, they might be a bit more expensive than unsecured ones. With these cards, that report your credit monthly, you will have access to less money and will have to pay more fees than with an unsecured card.