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The type of card you get, how you use it and the credit card balance you leave on it all can be huge factors in deciding your credit rating. If you have bad credit and are having a difficult time getting a credit card, not to worry, there are two different types of credit cards just for this reason: secured credit cards and unsecured credit cards.
The Best Secured Credit Cards to Help You on Your Credit Journey and How To Get Them
Those who have bad credit scores and/or are looking to get a better credit score often tend to lean towards secured credit cards because they’re one of the easiest ways to build credit. These types of credit cards require that you pay the credit card company a cash deposit of the amount you would like as a limit. This ensures that they get their money back but also helps to rebuild their credit score. Unlike unsecured credit cards, though, most don’t have annual fees.
Getting a secured credit card is actually pretty simple. All you have to do is apply online. Once you’ve submitted your application, the credit card issuer will check to make sure you meet their requirements. These usually include being the age of majority in your province and having a valid piece of government-issued ID. From there, all you have to do is pay the security deposit, and your card will be active. You’ll get this deposit back once the card is paid off in full and cancelled.
While it may still be possible to get an unsecured credit card depending on your debt-to-income ratio and your credit score, secured credit cards report the same way to the credit bureaus, so they are perfect for credit-building purposes.
Capital One Secured Mastercard
The Capital One Secured Mastercard is a great credit card for those who are new to credit or who are looking to rebuild their credit score. That said, a security deposit is required. This helps the credit card company to ensure you are committed to building your credit score. While there is no specific maximum credit limit for the Capital One Guaranteed Secured Mastercard, the minimum security deposit is $75, or you may have to pay the $300 deposit.
Your credit card limit will be specified to you with your approval. Another great feature of this credit card is that its interest rates are similar to those of an unsecured credit card. As long as you make your monthly payments on your credit card bill, you should see an increase in your credit score and potentially get an unsecured credit card in the future as well.
- Annual Fee: $59
- Minimum Credit Limit: $300
- Maximum Credit Limit: Not specified
- Interest Rate: 19.8%
- Cash Advance Interest Rate: 21.9%
The few eligibility requirements are:
- You must be the age of majority where you live
- You don’t already have a Capital One account or an application currently submitted for one
- Provide the required security amount
- You haven't applied more than once in the last month
- You haven't had a Capital One account in bad standing in the last year
Neo Secured Mastercard
The Neo Secured Mastercard is different from many other secured mastercards since you can earn rewards. Actually it’s similar to most rewards credit cards, except for the fact that it requires a security deposit.
The credit card issuer also has an app that shows you their partnered locations near you as well as your credit card balances. There are also different cashback bundles you can choose from to customize to your needs with this no fee card. Another great feature is that you can use your virtual card instantly once you get approval. With the Neo card, the minimum deposit is $50, but there is no specified maximum deposit.
- Annual Fee: $0
- Minimum Credit Limit: No specified
- Maximum Credit Limit: Not specified
- Interest Rate: 24.99%
- Cash Advance Interest Rate: 26.99%
Like the Capital One credit card, the Neo secured card has guaranteed approval once you meet a few requirements, such as:
- You must be a Canadian resident
- You must be the age of majority where you live
- You must pay the security amount
Home Trust Secured Visa Card
Just like the other 2 secured credit cards, the Home Trust Secured Visa is an effective way to build up your credit score. However, unlike the other cards, credit checks are required. That being said, even with low credit scores and even bad credit history, most applicants are approved. A great feature of this card is that it works just like an unsecured credit card and will build your credit score with major credit bureaus to help you get an unsecured credit card faster.
- Annual Fee: $0
- Minimum Credit Limit: $500
- Maximum Credit Limit: $10,000
- Interest Rate: 19.9%
- Optional Interest Rate with $59 annual fee : 14.9%
The eligibility requirements for this credit card are as follows:
- You must be the age of majority where you live
- You must have a source of income
- You aren’t currently in bankruptcy
- Subject to other terms and conditions that include but are not limited to a credit check
Refresh Secured Visa
The Refresh secured visa is another credit card that does not require a hard credit check. The deposit amount on this card ranges anywhere from $200 to $10,000. Your deposit amount will reflect on how much you can spend, which will affect your minimum payments.
That being said, you can still build your credit with this card. As long as you make your monthly payments, your positive payments are reported to both of the credit bureaus. However, any missed payments will decrease your credit score. Just like unsecured credit cards, you get the most credit benefits by leaving your credit balance under 35% of your total credit limit. The best way to determine if your credit score is being affected is by using free credit reporting apps.
- Annual Fee: $12.95 plus $3 per month
- Minimum Credit Limit: $200
- Maximum Credit Limit: $10,000
- Interest Rate: 17.99%
The Refresh Visa is a guaranteed approval as long as these few requirements are met:
- You must be of the age of majority where you live
- You must live in a province/territory that offers the Refresh Visa
- You must provide the required secured funds
TD Cash Secured Credit Card
Another great way to get a secured credit card is through your bank. If you have an active savings account with TD Canada Trust, you can apply for a secured credit card; however, to get this card, a credit check is normally required which is different from guaranteed approval credit cards. You can receive a card for the amount that is in your savings account that is linked to your credit card.
With this card, you can receive 1% cash back on all of your purchases, and your account is considered to be your security deposit. If you have a savings account, you aren’t planning on dipping into anytime soon, this is a great option. You can use your card just like any traditional credit card while building your credit score.
- Annual Fee: $29
- Minimum Credit Limit: Not specified
- Maximum Credit Limit: Not specified
- Interest Rate: 25.24%
This is not a guaranteed approval credit card, and the approval is done on an individual basis.
Scotiabank Value Visa
Unlike the other credit cards listed, the Scotiabank Value Visa card is not meant for poor credit, even though it is a great card to help you rebuild your credit score. The minimum credit score needed to get this card is usually in the good to excellent range. The Scotiabank unsecured credit card has a lower interest rate than a lot of other credit cards.
Even those that are at the top 5 banks. However, along with the credit score requirement and credit check requirement, there is a minimum income requirement of $12,000. However, it does include discounts on car rentals and card protection in the event of life changing situations like losing your job, sickness or even disability.
- Annual Fee: $0
- Minimum Credit Limit: $500
- Maximum Credit Limit: Not specified
- Interest Rate: 16.99%
There are some eligibility requirements with this card, however you do not need to bank with Scotiabank in order to be approved.
KOHO Prepaid Mastercard
Lastly, we have the KOHO Prepaid Mastercard. So far we have an unsecured credit card, secured credit cards, but we have yet to run into a prepaid credit card, until now. The main difference between a secured credit card and a prepaid credit card is that you can only spend the amount you put on the prepaid card, whereas a secured credit card is mainly just a deposit and you can have a higher credit limit than your secured deposit amount.
With a prepaid card like KOHO, there is no credit check required and guaranteed approval. It is a great way to not just increase your credit score, but to do it quickly.
Once you get your KOHO card, you can select the account you like and subscribe to credit building, which is only $10 per month. On top of reporting your monthly payments to the credit bureaus to increase your credit score, the KOHO card also has some neat perks like:
- A budgeting app
- 0.5% cash back on debit purchases
- Access to $100 of your next paycheck 3 days before payday for free
- Interest on your account balance at 4%
- Activate your card and get a $20 cash bonus that you can use within 30 days
What Credit Card is Best for Me?
Which credit card you choose to go with to rebuild your credit ultimately depends on your situation. Whether you have bad credit, poor credit, or good credit score, it can make a difference that works better for you. Don’t forget you aren’t limited to one option either. You can have 2 different types to help build your credit as well.
As important as it is to diversify your portfolio, having 2 new active and positive credit accounts on your credit report can make a big difference in your credit rating if they are used correctly. Here is a breakdown of which credit card is best for spending on your personal finance situation.
Neo Mastercard Vs Capital One
Another option for a secured credit card in Canada is the Neo Secured Mastercard. A major difference between the Neo secured credit card and the Capital One secured card is that you can earn cash-back rewards with the Neo card. There is no limit on the amount of cashback you can earn. The average earning is 5%, with over 8,000 different partner companies.
With either credit card, though, once you build your credit score and pay off your secured card, you can switch to a traditional credit card. Each card has some great features, but the Neo Mastercard offers better rewards. You don’t have to go with either of these, though. Once you’ve increased your credit score, you can choose whichever credit card that you like.
Best Credit Cards for Low Credit Scores
In general, all of the secured credit cards that don’t require a credit check are great for those with low credit scores. There are also good options for those just coming out of consumer proposals.
- Capital One Mastercard
- Refresh Secured Visa
- Neo Secured Mastercard
- Home Trust Secured Visa
All of these cards have different perks like cash advances or cashback rewards. You have to choose which is the best for you.
Easiest Credit Card to Get
The easiest type of credit card to get is a prepaid credit card. There really is no approval required. You just add the money into your account, spend it, and refill it as you go. It essentially acts as a bank account in which you pay a fee to have your credit account updated. On top of being the easiest card to get, it is also the fastest way to increase your credit score without going into credit card debt.
A secured credit card is the second easiest. There are a few small requirements, but in general, they are mostly guaranteed approvals. On top of that, you actually have a credit limit, not just the security deposit amount.
Best Bad Credit Credit Card
When it comes to getting a credit card with bad credit, you have two options: secured cards or prepaid cards. The best-secured credit card would be the Neo secured card. It has awesome rewards, guaranteed approval, low secured deposits and average rates. The best prepaid card would be KOHO.
It’s essentially a debit card that you can use to transfer money. You are still only spending your own money, but it works like a credit card. You pay a $10 fee to have your payment history reported to the credit bureau monthly and get some awesome perks that even include earning interest on the money in the account.
Best Credit Building Credit Card
The best credit card to build up your credit is the Capital One Secured Mastercard. It has a low annual fee, an average interest rate, and a small secured deposit required for the credit limit you receive. Because Capital One also offers unsecured credit cards, it can be simple to upgrade as well as long as you pay your monthly payments.
Instant Approval Secured Credit Cards for Bad Credit
The Refresh Secured Visa card is an instant approval credit card. It has a low yearly fee and a monthly fee of around $48.95 per year.
Instant Approval Unsecured Cards for Bad Credit
There are plenty of unsecured credit cards that are instant approval but they often look at more than just your credit score. It is much more difficult to get an unsecured credit card with bad credit than an unsecured one. So, unless you apply for one directly, you won’t know if you are approved.
$500, $1000 and $5000 Limit Credit Card Guarantees
When you are looking for a credit card, it’s normal to have an amount in mind that you are looking for. When it comes to a $500 card, whether it is for good or bad credit, that is often the minimum you will get with guaranteed approval. Higher amounts are more difficult to predict.
With a secured deposit many credit cards will give you $1000 and quite a few even $5000. There are no guarantees though. Just because they guarantee an approval, an amount can’t be guaranteed. You should receive the amount with your approval.
What Does A Good Credit Score in Canada Look Like
If you’re looking for a good unsecured credit card that offers great rewards on everyday purchases and a good purchase interest rate without a minimum personal income, then you’re going to want to have a good credit score. It’s recommended that you aim to have a credit score of at least 700 or more.
In order to have a credit score of at least 700 or more, you’re going to want to have a positive credit history and a good credit utilization ratio. This means that you don’t want to use more than 30% of your credit limit anytime. This amounts depends on your available credit limit for your credit card account. If fact, using a credit card responsibly is one of the most powerful ways to increase your credit score. So is making timely payments. Late payments are reported to Canada’s Credit Bureaus and can have a negative impact on a healthy credit score. They may have even more of an impact then a limited credit history.
How A Secured Credit Card Helps You Build Your Credit Score
Having a low credit score can really impact your life, especially those who are urgently seeking credit. However, using a secured credit card responsibly can make a really big difference to your credit score. In order to do this, though, it’s important to understand how secured credit cards work.
Unlike traditional credit cards, secured credit cards require a security deposit. The card issuer holds this deposit until you pay off and cancel the credit card. Your credit card limit, is however much you put down as a security deposit. Even though you have a deposit, you still need to make on-time payments to your balance that the issuer can report to the credit reporting agencies.
Which secured credit card you choose will determine which of the two Canadian credit bureaus your payments will be reported to. It will also determine if you’re eligible for any rewards and what your interest rate will be. Just like traditional credit cards, secured credit cards are also governed by the Financial Consumer Agency.
Other Ways to Increase Your Credit Score
While a secured credit card is a really effective way to increase your credit score, it isn’t the only way. Another great option is to use credit building services. A good example of this is a credit building loan. There are a few different options available out there, and they can provide you with the tools you need to get a real personal loan.
Another options that’s also technically the only secured card that doesn’t require a deposit is the KOHO Mastercard that is part of Mastercard International Incorporated. It’s also technically a prepaid credit card that allows you to earn cash back and purchase credit building as well. This means that your on time payments will be reported to the credit bureaus to help you increase your credit score. This can speed up the process of getting a unsecured credit card.
Final Thoughts
In Canada, most secured credit cards are guaranteed approval, even though some of them do require a credit check. Credit card issuers do this to see any outstanding debt you have. However, credit checks will aslo show them poor credit scores and poor credit history, which shouldn’t affect your approval. With any credit card that you’re applying for with bad credit, however, a deposit is going to be required.
Typically, a secured credit card functions as a way to streamline your spending habits while improving your credit score. With any of the secured credit card options, all you have to do is provide the security funds, and you can get started. Since there are so many secured credit card options out there, though, you’ll need to choose the one that is best for you.
