5 Best Secured Credit Cards Canada For 2022
What you should know about secured credit cards.
A secured credit card functions similarly to a standard credit card but requires a security deposit, which decreases the bank’s risk. They are accessible to people with bad credit. A bad or poor credit score makes it very unlikely that you’ll be able to gain a regular credit card. While you should avoid credit cards if you have a habit of misusing them and overspending, a credit card or other credit facility is essential to help you improve your credit rating.
What is a secured credit card?
A secured credit card is similar to a regular credit card, except it is protected by a deposit that serves as collateral. Customers can get these secured credit cards from card companies to assist them to create, rebuilding, or boosting their credit profiles. After the security deposit is collected, the card is issued, and the card limit is governed by the security amount.
Some secured credit card companies allow responsible cardholders to upgrade to an unsecured credit card. If that is not a possibility, you can close the account and apply for an unsecured card elsewhere. In any case, the issuer will return the security deposit in full (assuming no outstanding payments) when the account is canceled.
Secured vs. Unsecured Credit Card
The credit limit on unsecured credit cards allows access to borrowed funds that must be repaid later. The credit limit on secured credit cards is derived from the cardholder’s security deposit. Unsecured credit cards also provide bonuses, privileges, and incentives that secured cards do not.
Your credit report and score will determine whether a secured or unsecured credit card is the best option for you. To qualify for an unsecured credit card, you need to have a credit score of at least 660.
Secured credit cards help you in rebuilding your credit.
Even if you have bad credit or have declared bankruptcy, you may nearly always obtain a secured credit card. You can, of course, submit your application online. And, after you have a secured credit card in your wallet, if you use it and pay it off in full every month, your credit score will begin to improve.
This is because secured credit card issuers will report your credit card activity to the major Canadian credit agencies TransUnion and Equifax once a month. This implies that if you use your secured credit card wisely, your credit score should rise somewhat each month.
What is the amount of the security deposit for a secured credit card?
Depending on the issuer, the security deposit for a secured credit card might vary widely. Most secured credit cards in Canada, with a few exceptions, demand a deposit of at least $50 to $500.
With a secured credit card, how can I receive my deposit back?
You may be wondering how to get your deposit back after successfully switching from a secured credit card to an unsecured credit card. You must pay off your amount or terminate your credit card to receive your protected credit card deposit back. You can also receive your deposit refunded if you are upgraded to one of the issuer’s unsecured credit cards. Secured credit card companies will ultimately reimburse your security deposit to you by transferring cash to your bank account, issuing a check, or offering a statement credit.
Minimal included insurance coverages
Another useful aspect of most credit cards is that they come with some (or a lot of) free insurance. We researched to determine the value of credit card insurance, and the findings were somewhat startling.
While many credit cards offer extensive insurance coverage, secured credit cards do not. Of course, this is another obvious disadvantage, but considering the nature of these cards, it’s not surprising.
With (most) secured credit cards, you will not earn rewards.
One of the primary benefits of having a credit card is that many of them allow you to save money by collecting rewards.
Rewards might be as basic as cashback or as complex as a premium travel rewards program. There are many various sorts of credit card incentives available that users may personalize to their requirements.
Unfortunately, the majority of secured credit cards do not offer rewards. They exist for one and only one reason: to assist persons with negative credit in improving their credit score.
There is one big exception to this norm. Plastk Secured Credit Cards provide rewards on purchases, and you may earn at least 1% cash back anywhere you buy. With this card, you may improve your credit while also earning incentives.
Who is eligible for a secured credit card?
Secured cards are primarily intended for persons who are just approaching adulthood or who are new to Canada and need to establish credit. They are also meant for persons who might have difficulty obtaining an unsecured card, such as those with bad credit. As a result, secured credit cards are more easily obtained than unsecured credit cards.
Requirements
- Income Requirements
- Other Requirements
Income Requirements
Secured credit cards do not usually have severe or explicit income criteria. The Home Trust Secured Visa, for example, has no minimum income restriction.
Typically, you only need to be able to offer a security deposit and cannot be in bankruptcy.
Other Requirements
Apart from providing a minimum security deposit, you must be a Canadian resident of the age of majority in your territory or province.
Who offers secured credit cards?
FINANCIAL INSTITUTION
Royal Bank of Canada (RBC) There is no dedicated secured card. Newcomers or those attempting to develop credit, on the other hand, can apply for a secured RBC credit card by contacting the bank directly.
Neo Financial Neo Secured Mastercard
Plastk Plastk secured credit card
Capital One Guaranteed Secured Mastercard
There are more institutions that offer secured credit cards.
The Advantages and Disadvantages of Secured Credit Cards
Advantages
- Give you the opportunity to develop credit and boost your score.
- The credit limit is controlled by the cardholder’s security deposit, therefore there is less danger of overspending than with an unsecured card.
- Simple to get, even for people with no or poor credit.
- Some may provide bonuses or cashback.
Disadvantages
- Security deposits can range from $500 to $1,000.
- Some companies may impose monthly or yearly fees.
- It may have hefty interest fees.
- You will not get your security deposit monies until the account is closed, which can be a severe financial strain.
The bottom Line
If used carefully, a secured credit card can only help you build, rebuild, or restore your credit rating.
Make a plan to pay your bill in whole and on time throughout the grace period. When your credit score improves, you may easily apply for a conventional credit card and withdraw the deposit you made with the bank.
