When it comes to considering secured credit cards in Canada, you have quite an array of options to choose from. They come with different interest rates, annual fees, rewards, benefits, and minimum deposits. Here are some factors to consider regarding guaranteed credit cards, and a side-by-side comparison of Canada’s top ten!
What is a Secured Credit Card?
A secured, or guaranteed, credit card works on the same principle as a secured loan. With a secured loan, the lender has some tangible guarantee (like a home or car) that can be taken as collateral if the borrower should default on the loan. That’s why mortgage companies and lenders are willing to loan out large sums of money to people—because they know they’ll get either the money (and interest) in payment, or else they’ll get the property that was put up to secure the loan.
In the case of a secured credit card, the collateral is a sum of money you deposit when you are issued the card. The lender can be confident that you’re not a risk, because they already have your money in hand.
What Are Secured Credit Cards Good For?
So why even get a secured card? If you have the cash-in-hand sufficient for a deposit, you could just use your cash, right? Well, maybe not. You can’t use cash to purchase merchandise online, to make reservations, or even to pay some bills. Where a check or credit card is required, you’ll be out of luck if you don’t have a bank account or a card.
If your poor credit prevents you from qualifying for a regular credit card, or if you don’t yet have a credit history in Canada, you can still enjoy the convenience of paying for goods and services that require credit cards. You can also use that card to build (or rebuild) that credit score so you qualify for bigger things in the future.
Rebuilding Your Credit with a Secured Credit Card
If you’re looking to repair your credit rating, a secured credit card is one of the best tools at your disposal. You might think it’s wiser to “play it safe” and use cash, but that actually hurts your credit score. You actually need credit transactions in order to build up your score, so it’s important to use your secured card with intentional care.
Make sure that you make all your payments on time. That’s the number one thing you can do to repair your credit. A late payment of even a few days will undo a lot of your work toward credit repair. After a period of time making punctual payments, however, you will see your credit score improving visibly.
Top Canadian secured credit cards
Peoples’ Trust Secured Credit Card
* Annual fee: $70
* Interest: 12.99% on purchases, 24.5% on cash advances
* Minimum required deposit: $500
The relatively low interest rate on this card makes it attractive to people who might be carrying a balance on the card. Applicants need to have a bank account and a verified income in order to apply for this card. This card charges a fee of $5 for cash advances, and a $5 fee if you overreach your credit limit.
Home Trust Secured No Annual Fee Visa
* No annual fee
* Interest: 19.99%
* Minimum required deposit: $500
This card is ideal for people who expect to pay their balance in full every month. The interest rate is higher, compensating for the lack of annual fee, but this won’t affect you if you’re going to be paying your balance in full every month. The Home Trust card enables you to add another authorized user, and its credit limit may be as much as $10,000.
Home Trust Secured Low Interest Visa
* Annual fee $59
* Interest: 14.9%
* Minimum required deposit: $500
Of the two Home Trust cards, this version is preferable for people who might be carrying a balance from month to month, because the interest applied to that balance will be lower with this card. Applicants need to have a bank account in order to apply for this card.
Capital One Guaranteed Secured MasterCard
* Annual fee: $59
* Interest: 19.8%
* Minimum required deposit: $75
This easy to get credit card has one of the lowest minimum deposits, so it’s a good choice if you don’t have the $500 required by many of the other card companies. Its uses are less advantageous, since it has both an annual fee and a high interest rate, but it’s an option that’s open to you if you can’t afford the bigger deposit to get started.
Vancity Enviro Secured Visa
* No annual fee
* Interest: 19.5%
* Minimum required deposit: $500
Vancity offers a variety of extra perks, including insurance for travel accidents, price protection, and insurance for lost baggage. The card also has a system of reward-points for spending, called My Visa Reward Plus. The rewards include options like travel, redeeming for purchases, and charity donations.
The Vancity line of Classic credit cards includes several combinations of annual fee and interest rates, allowing you to choose the best solution for your situation. The options range from no annual fee and higher interest of 19.5% (for people who don’t plan to carry a balance) to a card with a $50 annual fee with lower interest of 11.25%.
Secured Credit Cards Offered by the Big 5 Canadian Banks
Secured cards are offered by all of the “Big Five” Canadian banks, and with relatively similar features. You will find that it’s difficult to uncover information on these cards online, and almost all of them require you to apply in person at the branch office.
You can inquire about details at the branch nearest you—and that’s not a bad thing. Although we’re accustomed these days to be able to do almost anything online, there’s something to be said for a face-to-face conversation with an expert who can talk to you about the pros and cons and details of the card for which you’re applying. So take the information below if it helps you to decide on which bank you’d like to visit, but know that any of these five banks will likely require you to apply in person.
Royal Bank of Canada (RBC) Secured Credit Card
* Annual fee $20
* Interest 11.99 on purchases & cash advances
* Minimum required deposit: $500
This low interest card with its modest annual fee is well suited for people who expect to be carrying a balance from month to month. Its optional extra features include travel insurance, roadside assistance, credit monitoring, and automatic payment options.
The RBC secured credit card charges fees of $3.50 for a cash advance ($5 if you’re out of the country) and an overlimit fee of $29 per statement period if your balance goes above your credit limit.
Bank of Montreal (BMO) Prepaid Credit Card
* Annual fee: $6.95
* No interest
The Bank of Montreal uses a prepaid model as its secured card option, meaning you can choose what amount you’d like to load to the card. It gives you more flexibility upfront (you don’t have the $500 minimum many other cards require) but doesn’t allow you to spend more money than you have on the card, or to take cash advances. The card itself operates much like a debit card, but without the associated checking account.
Toronto-Dominion (TD) Secured Credit Card
* Annual fee: $29
* Interest: 19.9%
* Minimum required deposit: $500
To apply for a Toronto-Dominion card, stop in at a TD branch office for an application. Your credit limit will be equal to whatever amount you are approved for, and deposit up front. If you maintain your TD secured credit card successfully for seven consecutive months, you can be eligible for an unsecured card as the next step toward repairing your credit.
Canadian Imperial Bank of Commerce (CIBC) Secured Credit Card
* Annual fee: $29
* Interest: 19.9%
* Minimum required deposit: $500
Like the TD card, you will need to apply in person for a CIBC secured credit card, by stopping in at a TD branch office for an application. Your credit limit will be equal to whatever amount you are approved for, and you make the deposit up front.
CIBC will give you a card for a specific term, usually two years. At the end of the two years they’ll refund your deposit—and by that time you will probably qualify for an unsecured card if you’ve used your secured card wisely.
Scotiabank Secured Credit Card
* No annual fee, no balance transfer fee
* Interest: 16.99%
* Minimum required deposit: $500
The no-fee Value Visa card is a great option if you’re looking to transfer balances from other credit cards. There’s no fee for balance transfer, and the introductory APR is a low 3.99 percent for the first six months. (That rate goes up to 16.99 percent after the introductory period, so try to pay off your balance before you hit the six-month mark.)
In Conclusion
Secured credit cards are the best way to improve your credit score, or to establish one if you are new to Canada and don’t have a financial history in this country. With your secured credit card you will enjoy all the benefits of credit card membership, like making purchases online and over the phone, or accessing cash from ATMs.
Your life will feel easier and your daily transactions will be smoother once you have a secured credit card at your disposal. Enjoy all the advantages of having a card, like being able to make reservations or purchase items online. And build your credit score as you go, by making sure to handle your card finances wisely.
Your secured credit card can serve as a stepping-stone to bigger things, like unsecured cards, car loans, or even a mortgage. Used wisely, the secured credit card is a gateway to your future. Let your credit score soar!