Although it depends on the credit card provider, some will require a higher cash deposit for a lower credit limit.
Secured credit cards are designed for higher-risk borrowers which is why a deposit is required. In the event that the credit card user defaults, the credit card issuer will keep the deposit to repay the owed balance. Other than the fact that security is required, a secured credit card is the exact same as a regular credit card. You will be able to make purchases in-store, online, through payment processing services, and use it to pay bills.
Do you know the difference between a secured credit card and a prepaid credit card? Find out here. All financial products have corresponding pros and cons.
Below is a list of all the advantages and disadvantages of secured credit cards. Check out these 8 secured credit card myths, click here. Secured credit cards actually have many uses and purposes compared to what you might initially think. A list of common secured credit card uses follows below. The major key difference between a prepaid credit card and a secured credit card is where the money comes from. Not all secured credit cards were made equal, below are the top five secured credit cards in Canada along with what you can expect when applying and using the card.
Learn how to increase your credit score without increasing your debt, click here. Build your credit with money that you already have with the help of the Refresh Financial Secured Visa. Refresh Financial Secured Visa has a low annual fee and a lower than industry standard interest rate.
This can bring individuals with poor credit or no credit peace of mind when applying. Lastly, Refresh takes your specific financial situation into consideration based on your credit score, location, income, budget, and financial goals. The Plastk Secured Visa Credit Card is the only secured credit card that offers a premium rewards program. As a cardholder, every purchase you make will earn you points that that you can redeem at a later date. Every dollar you spend on your Plastk card will earn you at least 1 point.
Points can be redeemed for, merchandise, gift cards, travel, exclusive event, and charities. In addition, to a great rewards program, the Plastk secured credit card can help those looking to improve their credit. All payments are reported to the largest credit bureau in Canada — Equifax, which can help you improve your credit. Because of this, the Plastk secured card is a great option for consumers who are having trouble gaining access to a traditional credit card and students or new Canadians looking to build credit.
Shop and pay online with your secured card much like you would with a conventional credit card. If you are prepared to pay your balance in full every month, this is an ideal card for you. There is no annual fee if you agree to a higher interest rate.
Although, the interest rate will not impact you so long as you make payments on time and in full. The fee is offset by a lower APR of The Vancity secured credit card is a great option for residents of British Columbia who have struggled with financial issues in the past but are now back on track and ready to rebuild their credit. This secured credit card works slightly different than other secured cards. The TD Cash Secured Credit Card is great for building or repairing your credit while also giving you the benefit of earning cash back on all your expenditures.
You can use it like any other card to make purchases both in-person and online and earn rewards. The TD secured credit card requires a deposit upfront which then becomes the credit limit. There is an annual fee and high interest, but there are other unique benefits to using this card.
So long as you manage the card successfully by making payments on time and in full for seven continuous months, you will become eligible for an unsecured credit card with TD.
This card will definitely help you along the path to improved credit and personal finances. The Capital One Guaranteed Secured MasterCard is a great option for Canadians who are just starting to build their credit or are in the process of repairing it. Approval is guaranteed, and the card is supported by Mastercard, so you can use it anywhere that MasterCard is accepted which is just about everywhere.
The Capital One Guaranteed credit card also has one of the lowest minimum deposits on the market making it easier to commit to. However, the low minimum deposit is offset by the annual fee and high-interest rate. The annual fee is unavoidable, unfortunately, but as long as you always pay off your full balance every month, you can dodge any interest charges. Need help choosing the right credit card for your needs?
Check out this article. Also, you might have to pay service fees for some transactions. This protects you if the financial institution holding your deposit declares bankruptcy. Beware of secured card offers from unknown institutions or issuers outside Canada. Contact the Financial Consumer Agency of Canada for assistance. These cards may only be accepted at a small number of stores or may require you to make purchases from a specific catalogue.
Read and make sure you understand all the terms and conditions associated with a secured card before you accept it. From the Financial Consumer Agency of Canada.
Which Credit Card is Right for You? From Equifax. The difference between secured and unsecured credit A secured credit card is different from the traditional credit lines we usually think of when it comes to credit cards. The credit issuer will request a deposit that can usually be paid directly from your bank account using your bank routing and account numbers. In most cases the credit line you get will equal the amount you deposit. In some cases, a few secured credit cards may give you a little extra credit line in addition to the deposit.
Once you have your account, start making purchases strategically — i. As you make payments on time and manage your debt responsibly, the creditor may increase your credit line without any additional deposit, but always follow Step 5 and make sure you can pay off what you borrow every month. After about 6 months depending on where you started with your credit score of on-time payments, you should see an improvement in your credit score — you will either need a credit monitoring service if you want to check or certain credit cards may offer a credit score tracker when you open the account.
Even if you start using unsecured credit instead, it may be a good idea to keep this secured account open and use it every so often so you can maintain it as your oldest account maintained in good standing — this is a factor in your credit score and closing the account may decrease your score. If you allow the account to default, you lose your deposit. Other tips for secured credit cards While secured credit cards differ depending on the card and credit issuer, the following general rules can help you use the account to your best advantage: Be careful with annual fees — these can make certain cards more expensive to use on a yearly basis.
Be wary of secured reward cards — in rare cases you may find a secured credit card with a rewards program included. However, earning rewards while you manage the debt effectively is a more advanced credit strategy. Additionally, rewards credit cards tend to have higher interest rates. Make sure the deposit is fully refundable — in most cases, you should be able to pay off your balance and receive your full deposit back.
This can give you a big edge as you work to build credit.
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