Best Credit Cards for Bad Credit in CanadaSeptember 27, 2023
If you have bad credit, one of the best ways to start rebuilding your credit score is with a credit card. While you may not qualify for a higher-limit credit card, there are still plenty of credit cards out there that you can qualify for. There are even some credit cards that are meant for those who are looking to rebuild credit. That said, though, you don’t have to have a poor credit score to get these cards. You can also be new to Canada or new to credit. There are even Student credit cards that you can get approved for as a student with a low credit score.
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When you’re looking into credit cards to build your credit, it’s important to remember that there are two types to choose from: unsecured and secured. Unsecured credit cards are just traditional credit cards. Secured credit cards require a cash deposit in order to be used. The type of credit card you’re approved for depends on your credit score as well as your credit history and debt-to-income ratio. Either way, though, you can get a card that fits your needs while creating a new positive credit line.
Which Type of Credit Card is Best for Bad Credit Scores?
When you’re looking to rebuild your credit, you can’t go wrong with a secured or unsecured credit card. The type you want to avoid is a prepaid credit card. Prepaid credit cards essentially work like credit cards. You’re only able to spend the money that you add to the card. This is great for people who need a credit card but don’t want to use one. However, prepaid cards have no impact on your credit score. If you aren’t worried about your credit score, then it could be a good choice, though, since you won’t incur any debt.
Both secured and unsecured credit cards report to the credit bureaus. You have to be careful, though. The key to increasing your credit score with a credit card is using your card correctly.
How to Get a Credit Card with Bad Credit
When you’re looking for a new credit card and you don’t have the best credit, the best option for you will be to do your research. Every time you apply for a new card, it will affect your credit score, so your best bet is to look for cards that have guaranteed approval or have a flexible credit score minimum. Not only will this make it easier for you, but it’s also going to reduce the negative impact there is on your credit report.
Often, people think it’s impossible to get a credit card with bad credit, but that’s rarely the case. Credit cards can actually be one of the easiest forms of credit to get and are often the first credit line people open when they’re new to credit. Often, it can be more difficult to get credit cards with large financial institutions, and you’re better off getting cards from online lenders or store credit cards when you’re looking to rebuild.
The Easiest to Get Approved for With Bad Credit
While prepaid credit cards are available to anyone, you have to apply for secured and unsecured credit cards. Out of the two choices, secured credit cards are the easiest to get with bad credit. This is because they require a deposit, giving the credit card issuer some security. That said, secured credit cards report to the credit bureaus and have the same effect on your credit score as an unsecured card.
The reason you have to apply for a secured credit card is to assess your approval amount and make sure you meet the minimum requirements. Some issuers will automatically approve a smaller credit limit, but many secured credit cards offer higher limits with different deposits for each one. Other than the deposit, they function just like an unsecured credit card.
Best Credit Cards You Can Get with Bad Credit
While there are some great cards out there for bad and poor credit, there are a few that stand above the rest. Let’s take a look at those.
Home Trust Secured Visa
The Home Trust Secured Visa is considered to be one of the best secured credit cards in Canada. It’s actually been voted the best secured card for the last 3 years by RATESDOTCA. They even promote the fact that almost everyone who applies for this card is approved.
Some awesome features included with this card are:
- No annual fees
- Online account management
- Digital wallet availability
- Worldwide use accepted
- Zero liability policy
With the Home Trust Secured Visa, the amount you’re able to spend is set by your deposit amount. The amounts they allow range from a minimum deposit of $500 to a maximum deposit of $10,000. That said, you still need to make your monthly payments on time in order to improve your credit. Your deposit will be held as long as you hold your secured visa card.
Some stipulations included with this card are:
- You must have a source of income
- You can’t currently be in bankruptcy
- You must be the age of majority in your province or territory of residence
- You must meet the terms and conditions, have a valid ID and meet the Know Your Client requirements
The Home Trust Secured Visa is available in all provinces and territories except for Quebec. With this card, your interest rate is 19.99% if you choose to have no annual fee. If you want to have a lower interest rate, you can pay an annual fee of $159 and get an interest rate of 14.90%.
Neo Secured Credit
Neo is one of the few secured credit cards that offers guaranteed approval. On top of that, the Neo Secured Credit Card also has no annual fees, and you can earn unlimited cashback. The interest rate on standard purchases ranges from 19.99% to 29.99%. The cash advance rate ranges from 22.99% to 31.99%. In Quebec, however, the rates are different. The standard rate ranges from 19.99% to 24.99%, and cash advances range from 22.99% to 25.99%.
With Neo, your credit limit is based on how much you put down as a deposit. These funds will then be put into your Neo credit account once you cancel your card and the balance is paid in full.
Unlike other secured cards, no credit check is required. It’s also one of the few instant-approval credit cards. You can use this card just like any other credit card. It’s accepted anywhere that accepts Mastercard. A bonus is the minimum deposit is only $50. This way, you can put down however much you’re comfortable with.
The only approval stipulations to get a Neo Secured Card are that you must:
- Be the age of majority where you live
- Be a Canadian resident
- Provide security funds for your limit
While KOHO is technically a prepaid credit card and not a secured credit card, it does offer credit-building capabilities. The bonus is there are different plans you can choose from, and each one comes with a free 30-day trial. With KOHO, you even earn interest with all of your purchases.
The KOHO easy plan is free. That said, credit building will cost extra. This plan includes:
- No monthly fees
- 0.5% interest on your balance
- 1% cashback on grocery and transportation purchases
With the easy plan, credit building costs $10 per month. It’s pretty simple, really. You just take out a line of credit with KOHO, and as long as you make your monthly payments on time, you’ll start to see your credit score improve.
The KOHO essential plan goes for just $4 per month. With this plan, you get:
- 1% cashback on grocery, transportation, food and drink purchases
- 4.5% interest on the first $500 and 2% after that
- 30% off credit building
The extra plan costs just $9 per month. This plan comes with some awesome perks including:
- 2% cashback on grocery, transportation, food and drink purchases
- 4.5% interest on the first $1,000 and 3% after that
- 30% off credit building
- No foreign transaction fees
This is a good option if you’re using your card when you travel.
Lastly, we have the everything plan. It comes at a cost of just $19 per month. This plan includes:
- 2% cashback on grocery, transportation, food and drink purchases
- 4.5% interest on your entire balance
- 50% off credit building
- No foreign transaction fees
- Fast e-transfers
For a total of $24 per month, you can get this account as well as continue to build credit. Plus, unlike a credit card, you don’t have to pay interest or incur any debt.
Capital One Cards
With Capital One, there are two different Mastercards that are ideal for those with bad credit. One of those cards is secured, and the other isn’t. Either way, both of them are considered to be guaranteed approval credit cards.
Capital One Guaranteed Mastercard
The Capital One Guaranteed Mastercard is a great way to start rebuilding your credit card. Whether or not you have to put down a security deposit will depend on your credit check. That said, this is a guaranteed approval card. There’s an annual fee of $59, and the standard interest rate is 21.9%.
The four stipulations you need to meet for this card are:
- You need to be at least the age of majority where you live
- You haven’t applied to Capital One more than once in the last 30 days
- You have no Capital One accounts that have been in bad standing in the last year
- You have no other Capital One accounts or pending applications
The everyday benefits of this card include:
- Zero Liability
- Purchase Assurance
- Extended Warranty Protection
- Price Protection
- Car Rental Waiver
- Travel Assistance
- Baggage Delay Coverage
- Travel Accident Insurance
There’s more than that as well. It even includes the Mastercard benefit of Mastercard Global Service.
Capital One Guaranteed Secured Mastercard
The Capital One Guaranteed Secured Mastercard holds all of the same benefits as the Guaranteed Mastercard. The only difference is that the security funds are required.
With this card, the security funds required will be between $75 and $300, based on your application. These funds will need to be received by Capital One before you can start using the card. They’ll stay as a security deposit until you’ve closed your account and paid off your balance in full. They’ll be returned to you then.
Plastk Secured Credit Card
Another great secured card with perks other than credit building is the Plastk Secured Credit Card. The details of the Plastk card are:
- $48 annual fee
- 17.99% interest rate
- Zero fraud liability
- Instant balance payments from your bank account with e-transfer
- $6 monthly maintenance fee
- 3-day cash advance grace period
- 25-day purchase grace period
- Referral program
Even though the Plastk Card requires a security deposit, it’ll only be used if you miss your monthly payments. Otherwise, it’ll be returned to you once the account is closed and the balance is paid in full. As long as you make your monthly payments, you’ll see your credit score start to improve. Plus, you’ll earn cashback that you can use on your card balance. 250 points are equal to $1, and you can redeem with a minimum of 2,500 points.
Canadian Tire Mastercard
The Canadian Tire Mastercard is a good store card you can use to earn rewards while boosting your credit score. It’s one of the easier secured credit cards to get approved for. At certain stores, you can earn 4% cashback. You can also earn:
- 1.5% at grocery stores other than Costco or Walmart (on the first $12,000 per year)
- $0.05 per litre off at Gas+ locations
- .5% anywhere else
Your rewards can then be redeemed at some of your favourite stores including:
- Canadian Tire
- Sports Chek
- Party City
- Hockey Life
- Sports Experts
- Hockey Experts
Some other perks included with this card are that there’s no annual fee and you break your large purchases into payment plans. These payment plans are eligible for purchases of $150 or more and include no fees, no interest financing and equal monthly payments. Plus, this card also includes:
- Exclusive member offers
- Purchase Security Protection
- Rental Car Collision Insurance
- Roadside Assistance Gold Plan
- 24/7 Concierge Service
The standard interest rate for this card is 19.99%. The interest rate on balance transfers is a bit higher at 22.99%. There’s also a foreign exchange rate of 2.5% and a cash advance fee of $4.00 per transaction.
PC Financial Mastercard
A great way to save money on groceries while rebuilding your credit is with the PC Financial Mastercard. While this card is subject to credit approval, you don’t have to have a good credit score to get approval.
The purchase interest rate with this card is 19.99%. For cash advances, the interest rate is 22.97%. That said, though, there’s a 21-day grace period on all purchases before you start having to pay interest.
A perk that comes with this card is that you can earn points on all purchases. That said, there are certain stores where you can earn more points.
- You earn 25 points per $1 spent at Shoppers Drug Mart
- You earn 30 per litre at Esso Mobil stations
- You earn 20 points per $1 spent with PC Travel
- You earn 10 points per $1 spent on all other purchases
These points can be redeemed at participating Loblaws stores. You can also redeem points on certain purchases with Esso as well. You can redeem up to 4,000 points for 10 cents off per litre. You can also redeem 10,000 points on any of the car wash packages.
Because this card is a Mastercard, you have access to the Mastercard Global Service, which will replace your card and give you a cash advance in an emergency. You’re also able to add up to 4 authorized users to your account.
ATB Alberta Secured Mastercard
If you live in Alberta, then the ATB Secured Mastercard is a great way to start building up your credit score. Like many of the other cards we’ve mentioned, this is a secured credit card. The minimum security deposit required, however, is $500. How the collateral works in this case is that it’s held until your credit rating has been established or until you close the account. Many of the other secured cards will only return the deposit when you close the account.
The fees and rates on this card are:
- $49 annual fee
- $25 annual fee for each additional card
- 19.99% purchase rate
- 22.99% cash advance rate
- 2.9% foreign currency conversion rate
- 3% promotional balance transfer fee
- $40 NSF free
- $25 over limit fee
- $29 rush replacement card fee
There’s also balance protection available. The premium is $0.99 for every $100 on your monthly balance, and it covers up to a maximum of $25,000.
Vancity Enviro Secured Card
For residents of British Columbia looking for a secured credit card, the Vancity Enviro Secured Card is another great choice. This card, however, does work a little differently than the rest. Unlike other cards that hold your deposit as a security, Vancity will put your security deposit into a savings account. It’s not put into just any savings account, though; it’ll be put into a term deposit account. This means that as your deposit sits there, you’ll actually earn interest on it. The amount that you put in the term deposit account will be your maximum credit limit.
Once you’ve applied for this credit card, you’ll be told what your annual fee and interest rate will be. Annual fees range from $0 to $395, and interest rates range from 11.25% to 19.5%. In order to be eligible for this card, there are some requirements you need to meet.
- You must be a BC resident
- You must be at least 19 years of age
- You must be a new or existing member of Vancity in good standing
- You must deposit the security amount of your credit limit into a term deposit account
Once you’ve met all of the requirements, then you can start using your card.
Minimum Credit Score Needed for Credit Cards in Canada
Due to the fact that there are so many different credit card options available, there really isn’t a minimum credit score to determine approval. That said, if your credit score is a minimum of 650 or higher, you’re likely to get the most credit card options. You’re also more likely to get a higher limit and qualify for a lower interest rate card.
For credit scores under 650, you’re still able to get many different unsecured cards, but those cards will likely have fewer rewards and may not be with a traditional financial institution. That said, they’ll still have the same effect on your credit report as any other credit card.
How to Properly Use Your Credit Card to Build Your Credit Score
When it comes to improving your credit score, just having a credit card isn’t enough. It’s key that you use that credit card effectively in order to get your score as high as you can. Here are a few tips to help you with that.
- Keep a Low Credit Balance: Many people think that as long as you stay within your credit card limit and pay your minimum payments, you’re helping your credit, but that isn’t necessarily true. The trick to getting the most credit benefit from your card is to keep your balance within 30%-35% of your total credit limit. This not only shows financial responsibility but it gives lenders the confidence to lend you more money.
- Make Your Payments on Time: It’s important to pay your credit card bill on time every month to receive a positive payment history. The credit card company will report this to the credit bureaus, and you’ll start to see a positive impact on your credit report.
- Pay Your Balance in Full: The best way to use a credit card is as if it’s your debit card. You should only spend the money you know you have. This will allow you to pay your balance in full every month. You can save on interest this way and avoid large amounts of debt.
- Keep Your Account Open: On your credit report, your Canadian credit history is important. You want to show that you have a long, consistent credit history. When you cancel credit accounts, it shortens your credit history. You want to keep any positive history you have on there as long as possible.
While doing all of this, it’s also important to keep an eye on your credit score. This way, you know if your score is improving, and if you have a secured credit card, you can upgrade to an unsecured credit card.
Whether you’re new to Canada, just starting out on your credit journey, or have a poor credit history, there are plenty of credit card options available to you. You also don’t have to go with the first credit card that approves you. You can also choose to go with more than one credit card. It’s ultimately up to you.
Keep in mind, though, that when you get a credit card, it’s important that you pay attention to your credit balance. Don’t spend more than you can afford, and keep track of your credit score. Ultimately, the credit card is there to be used as a tool to improve your financial future. That said, it can be easy to overuse your card and end up damaging your credit even further by getting into credit card debt. This can be avoided by paying your balance in full each month and making your payments on time.