A poor or bad credit score makes it unlikely that you will easily qualify for a regular credit card.
While you may want to avoid credit cards if you tend to misuse them and overspend, paradoxically, a credit card or other credit facility is required to help you rebuild your credit rating.
Borrowers with bad credit are not without options. There are secured and unsecured credit cards you can qualify for depending on your financial history, credit score, and ability to put down a deposit that serves as collateral.
This post covers the best-secured credit cards you can apply for in Canada, including the Plastk Secured Credit Card and Home Trust Secured Visa.
Table of Contents
What is a Secured Credit Card?
A secured credit card is different from a traditional credit card in that you are required to provide a security deposit (or collateral) to protect the lender if you default on your payments.
This refundable deposit is held in a savings account and is typically equal to your credit limit.
Secured credit cards are not only suitable for people who are trying to repair their credit score. In some cases, individuals without a credit history (e.g. newcomers and foreign students) may also use them to build or establish a credit rating.
My first credit card in Canada as a student was an RBC secured credit card. If you are a permanent resident, you can usually qualify for a regular credit card.
A poor credit score is one that is 650 and below. If you do not know what your credit score is, you can find out here for free.
How Do Secured Credit Cards Work?
Other than the fact that you will need to put down a deposit, a secured credit card is very similar to a standard credit card.
The card issuer reports your credit activity to the credit bureaus and this will raise your credit score if you pay your balance in full and on time each month.
Usually, your security deposit will match your credit limit and most secured credit cards do not offer rewards or extra perks.
The other credit card types you can take a look at if you are trying to pay off your credit card debt or consolidate it are:
Unsecured credit cards: You won’t have to put down a deposit, however, your credit score has to be at least in the fair to good category. An example is the Scotiabank Value Visa.
Balance transfer credit cards: These cards allow you to consolidate your credit card debt on one card at a lower interest rate. Here are the top balance transfer cards in Canada.
Low-Interest rate credit cards: These cards offer a lower purchase and/or balance transfer AIR and are great for saving on interest fees.
Prepaid credit cards: These cards do not impact your credit score, however, they provide many of the conveniences that come with regular credit cards and are widely accepted for payments and other transactions. Read more about them here.
Best Secured Credit Cards in Canada
These are the top secured and guaranteed approval credit cards available to Canadians.
1. Home Trust Secured No-Fee Visa
- Annual fee: $0
- Interest rate: 19.99% purchases and cash advances
- Security deposit: $500 – $10,000
- Credit limit: $500 – $10,000
The Home Trust Secured No-Fee Visa is a no-fee secured credit card that boasts an approval rate above 95%.
If you are looking for a credit card that can help you repair or rebuild your credit, this card works, and approval is almost guaranteed unless you are currently in bankruptcy.
2. Plastk Secured Visa* Credit Card
- Annual fee: $48 plus $6 monthly maintenance fee
- Interest rate: 17.99% on purchases; 21.99% on cash advances
- Security deposit: $300 – $10,000
- Credit limit: $300 – $10,000
The Plastk Secured Visa* Credit Card is designed with credit building in mind and offers some other unique perks including:
- Free access to your credit score on a monthly basis
- Rewards points on everyday purchases
- Welcome bonus of 5,000 points ($20 value)
- 0% APR on purchases for the first 3 months
The card also comes with a versatile mobile app that’s available on iPhone and Android devices.
To qualify, you must have reached the age of the majority in your province or territory, and be able to provide a security deposit.
3. Home Trust Secured Visa
- Annual fee: $59
- Interest rate: 14.90% purchases, 19.80% cash advances
- Security deposit: $500 – $10,000
- Credit limit: $500 – $10,000
The Home Trust Secured Visa annual fee card is different from its no-fee counterpart in that it offers a lower interest rate of 14.90% on purchases.
You can be approved for a credit limit as high as $10,000 and approval rates exceed 95%.
4. Scotiabank Value Visa
- Annual fee: $29
- Interest rate: 12.99% purchases (0.99% promo rate for balance transfers for 6 months)
- Credit limit: Minimum of $500
If you have a fair or better credit score or are a newcomer to Canada, the Scotiabank Value Visa is worth checking out.
It offers a lower interest rate of 12.99% on purchases and cash advances, and you can also take advantage of the promotional 0.99% balance transfer rate for 6 months.
This card also offers up to 25% discount when you use it to pay for car rentals at participating Avis or Budget locations.
Bonus: Capital One Guaranteed Secured Mastercard
- Annual fee: $59
- Interest rate: 19.80% purchase AIR
- Security deposit: $75 – $300
- Credit limit: $300 – $2,500
The Capital One Guaranteed Secured Mastercard is one of the easiest secured credit cards to qualify for in Canada as long as you:
- Are at least the age of the majority in your province or territory of residence
- Have not applied for a Capital One account more than once in the last 30 days
- Don’t have an existing Capital One application
- Can provide the required security deposit
This card allows you to increase your credit limit to $2,500 if you can provide the collateral.
Conclusion
A secured credit card only serves its purpose to help you establish, rebuild or repair your credit rating if you use it responsibly.
Plan to pay your balance in full and on time within the grace period. After your credit score has improved, you can easily apply for a standard credit card and withdraw the deposit you give to the bank.
If what you are looking for is a bad credit personal loan, click here for options.
I would also encourage others to speak with their credit union. My local credit union, Vancity, offers all of their Visa cards in secured versions. If you’re a BC resident, I highly recommend looking into their no-fee Enviro Visa Classic. It provides 0.5% cashback, extended warranty and lets you keep the deposit in an interest-bearing GIC or savings account.