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<\/source><\/picture><\/div>\nA secured credit card can help individuals with limited or poor credit history to rebuild their credit scores. However, many Canadians are unsure of how secured cards differ from regular and prepaid credit cards. This article covers the basics of secured credit cards and explains when you might need one.<\/p>\n
What Is a Secured Credit Card?<\/h2>\nSecured credit cards work much like regular ones, but with one key difference: they require a refundable security deposit. This deposit acts as collateral, making it less risky for the lender to issue the card to someone with a low credit score<\/a> or no credit history.<\/p>\nWhen you apply for a secured credit card, you\u2019ll need to provide a security deposit, which is usually equal to the credit limit on the card. For example, if you apply for a $500 credit card limit, you\u2019ll need to provide a security deposit of $500 upfront.<\/p>\n
This security deposit is held in a secure account, like a savings account or GIC product<\/a>. You won\u2019t have access to those funds while you have the secured credit card in place. Over time, as your credit score improves<\/a>, the credit card issuer may be willing to release the security back to you and switch your credit card account to a regular unsecured card.<\/p>\nHow Secured Credit Cards Help You Build Credit<\/h2>\nOnce your secured credit card has been activated, it works just like a regular credit card. You can make purchases and pay bills in person and online with your card. The main difference is that your own money, in the form of a security deposit, is backing your credit limit.<\/p>\n
One of the primary benefits of secured cards is that they can help you build a positive credit history. Most secured credit cards report your payments to the major credit bureaus, TransUnion and Equifax<\/a>, allowing you to establish a track record of responsible credit use.<\/p>\nBy making timely payments and keeping your balance low, you demonstrate to lenders that you\u2019re a reliable borrower.<\/p>\n
As you build your credit by using secured credit cards responsibly, you may eventually qualify for unsecured credit cards with better rewards and lower interest rates. So, while secured credit cards may not offer the same perks as their unsecured counterparts, they\u2019re a critical tool for building or rebuilding credit, paving the way for a more stable financial future.<\/p>\n
Secured vs. Prepaid Credit Cards<\/h2>\nPrepaid credit cards are more like debit cards. You load funds onto the card and use it to make purchases until the funds run out. Unlike secured credit cards, prepaid cards don\u2019t require a deposit that the issuer holds. Instead, the funds you load onto the card are used directly for transactions. Prepaid cards typically don\u2019t report to credit bureaus, so they won\u2019t help you build your credit. They might also have fees for usage or loading the card with funds.<\/p>\n
Secured vs. Unsecured Credit Cards<\/h2>\nUnsecured credit cards<\/a> do not require a security deposit. They tend to offer higher credit limits and are more common than secured cards, but they are harder to obtain if you have a poor credit rating or no established credit history. Both secured and unsecured credit cards report your payment history to credit reporting agencies, allowing you to build or improve your credit score.<\/p>\nSecured Credit Card Examples in Canada<\/h2>\nMost banks offer a secured credit card product, as do other credit card issuers. Here are some examples of secured credit cards in Canada.<\/p>\n
Neo Financial Secured Mastercard<\/h3>\nThe NEO Financial Secured Mastercard<\/a> is a guaranteed approval, no annual fee secured credit card designed for people who want the convenience of a credit card but are struggling to qualify for a regular. unsecured Visa or Mastercard.<\/p>\nYou can get this card with a credit limit as low as $50 (and up to $10,000), and Neo doesn\u2019t pull a hard credit check when you apply, which is a nice bonus. Speaking of bonuses, this card offers cash back of up to 5% when you use the card at one of Neo\u2019s many retail partners.<\/p>\n
Home Trust Secured Visa<\/h3>\n
When you apply for a secured credit card, you\u2019ll need to provide a security deposit, which is usually equal to the credit limit on the card. For example, if you apply for a $500 credit card limit, you\u2019ll need to provide a security deposit of $500 upfront.<\/p>\n
This security deposit is held in a secure account, like a savings account or GIC product<\/a>. You won\u2019t have access to those funds while you have the secured credit card in place. Over time, as your credit score improves<\/a>, the credit card issuer may be willing to release the security back to you and switch your credit card account to a regular unsecured card.<\/p>\n Once your secured credit card has been activated, it works just like a regular credit card. You can make purchases and pay bills in person and online with your card. The main difference is that your own money, in the form of a security deposit, is backing your credit limit.<\/p>\n One of the primary benefits of secured cards is that they can help you build a positive credit history. Most secured credit cards report your payments to the major credit bureaus, TransUnion and Equifax<\/a>, allowing you to establish a track record of responsible credit use.<\/p>\n By making timely payments and keeping your balance low, you demonstrate to lenders that you\u2019re a reliable borrower.<\/p>\n As you build your credit by using secured credit cards responsibly, you may eventually qualify for unsecured credit cards with better rewards and lower interest rates. So, while secured credit cards may not offer the same perks as their unsecured counterparts, they\u2019re a critical tool for building or rebuilding credit, paving the way for a more stable financial future.<\/p>\n Prepaid credit cards are more like debit cards. You load funds onto the card and use it to make purchases until the funds run out. Unlike secured credit cards, prepaid cards don\u2019t require a deposit that the issuer holds. Instead, the funds you load onto the card are used directly for transactions. Prepaid cards typically don\u2019t report to credit bureaus, so they won\u2019t help you build your credit. They might also have fees for usage or loading the card with funds.<\/p>\n Unsecured credit cards<\/a> do not require a security deposit. They tend to offer higher credit limits and are more common than secured cards, but they are harder to obtain if you have a poor credit rating or no established credit history. Both secured and unsecured credit cards report your payment history to credit reporting agencies, allowing you to build or improve your credit score.<\/p>\n Most banks offer a secured credit card product, as do other credit card issuers. Here are some examples of secured credit cards in Canada.<\/p>\n The NEO Financial Secured Mastercard<\/a> is a guaranteed approval, no annual fee secured credit card designed for people who want the convenience of a credit card but are struggling to qualify for a regular. unsecured Visa or Mastercard.<\/p>\n You can get this card with a credit limit as low as $50 (and up to $10,000), and Neo doesn\u2019t pull a hard credit check when you apply, which is a nice bonus. Speaking of bonuses, this card offers cash back of up to 5% when you use the card at one of Neo\u2019s many retail partners.<\/p>\nHow Secured Credit Cards Help You Build Credit<\/h2>\n
Secured vs. Prepaid Credit Cards<\/h2>\n
Secured vs. Unsecured Credit Cards<\/h2>\n
Secured Credit Card Examples in Canada<\/h2>\n
Neo Financial Secured Mastercard<\/h3>\n
Home Trust Secured Visa<\/h3>\n