Canada’s best credit cards for people with bad credit 2022

Secured credit cards vs. unsecured credit cards vs. prepaid cards

Sure, a poor credit history will limit the cards available to you, but that’s not to say you don’t have much choice. For starters, when using a credit card to rebuild your credit score, you’ll first need to choose between a secured and an unsecured card. A secured credit card is offered on the condition that you “secure” it with collateral, usually in the form of a refundable deposit that can be claimed by the lender if you default on your payments. These cards are marketed directly to those with bad credit, so they have an easier approval process and come with no frills. And lenders report back your activity to the credit bureau, which builds up your score as you continue to repay responsibly. A prepaid card is a type of credit card where the credit limit is directly based on the holder’s deposit.

Alternately, while not generally available to those with bad credit, unsecured cards are occasionally offered to consumers with “fair” credit scores—generally in the 600 to 650 range. As the name suggests, an unsecured card doesn’t require a deposit. Plus, unlike secured cards, many unsecured credit cards offer rewards (think points or cash back, which is a nice perk, isn’t it?). That said, they can command tougher approval requirements than unsecured cards. And like all contracts, it’s always a good idea to read the fine print when selecting your card.

When you have bad credit it can affect your entire financial picture–including your ability to improve your credit score. That’s where the Neo Secured Card comes in. No matter your credit score, you can open a Neo account without a hard credit check, which means you won’t further damage your score. Deposit as little as $50 or as much as you like and that’s your limit. Use the card like any other credit card for convenience and to rebuild your credit score. Plus, the Neo Secured Card is a guaranteed approval credit card meaning that if you are a Canadian citizen of the age of majority and deposit security funds, you’re approved. This card also sweetens the pot by giving you the opportunity to earn cash back on your purchases, so you can keep even more of your money in your wallet. Look out for huge welcome promotions like the 15% cash back on your first purchase at some retail partners and take advantage of partner deals with an earn rate of up to 5%. Neo guarantees at least 1% cash back on everything else, too.

•Annual Fee: $0

•Interest rate: 19.99%-24.99% on purchases

•Min. Deposit: $50
Get more details about the Neo Secured Card *

Best secured credit card for low interest

Home Trust Secured Visa Low Interest Option*

Normally, this card has a standard 19.99% interest rate, but when you opt into the $59 fee, it goes down to 14.90%—a big difference if you’re carrying a balance. You can use this card with a minimum deposit of $500 and the limit on the card corresponds to the deposit amount. If you need a higher credit limit, you can deposit more—up to $10,000. You also have the option of paying the annual fee in a lump sum or in installments. Be aware, though, that the card carries a $12 inactivity fee for accounts unused for a year. Note: This card is not available to residents of Quebec.

• Annual fee: $59
• Interest rate: 14.90% on purchases

Min. Deposit: $300

Get more details about the Home Trust Secured Visa*

Best credit card for bad credit

Capital One Low Rate Gold Mastercard

The Capital One Low Rate Gold Mastercard is a solid choice for people with a low credit score. For a fee of $79 per year, cardholders get an eyebrow-raising competitive interest rate of 14.9%, and access to perks including price protection, travel benefits and insurance. Plus, if you don’t qualify for the un­secured Capital One Low Rate Gold, Capital One will still approve you for its alternative secured product, the Capital One Guaranteed Secured Mastercard. This makes for a good fail-safe, and helps people access a credit card with a security deposit as low as $75 and a $59 annual fee.

• Annual Fee: $79
• Interest rate: 14.9% on purchases and balance transfer; 19.8% on cash advances
• Personal income required: $0
• Other perks: Price protection (difference of up to $100 per item, to a maximum of $500/calendar year); common carrier travel accident insurance; baggage and rental vehicle insurance

Honourable mention

Refresh Secured Visa*

The Refresh Secured Visa is in line with the other cards on this list in terms of its interest rate (17.99%), but it earns its place here for two distinct reasons. First, you’re guaranteed to be approved without a credit check, which means you can avoid a hit to your credit score. Second, with its Financial Intelligence Training—a free online educational program—those with bad credit can access tools to improve their financial picture. (Who couldn’t benefit from learning more about finance?) As an added bonus, you can earn $100 each time you refer someone to sign up for the card—which isn’t going to dig you out of debt on its own, but it’s a nice incentive.

• Annual Fee: $12.95 plus a $3 monthly fee, for a total of $48.99 annually
• Interest Rate: 17.99% on purchases

Min. Deposit: $200

Get more details about the Refresh Secured Visa*

Best credit card for students with bad credit

BMO Air Miles Mastercard for Students

The BMO Air Miles Mastercard for Students helps young people get a credit card and start earning Air Miles that can be redeemed for cash, merchandise, or travel. The application process isn’t onerous so if you’re a Canadian citizen who has reached the age of majority and you’re enrolled in a recognized post-secondary school, you’re most likely eligible (you’ll need to show some sort of income, whether from loans, scholarships, or even a family allowance). And, once you’re approved, you’ll have access to one of the country’s most popular rewards programs. You’ll earn 1 Air Mile for every $25 dollars you spend and you can triple this by shopping at participating partners. Show your Air Miles card and double those points again. There are loads of ways to earn, including the welcome bonus for new members of up to 800 Air Miles–that’s worth $80 in cash. The BMO Air Miles Mastercard also comes with financial insights that will help you stay on top of your budgeting. 

Best prepaid credit card for bad credit

Koho Premium Prepaid Visa*

The KOHO Premium Prepaid Visa is designed to keep you on track with all of your finances, since it offers free financial coaching and handy budgeting tools. It’s also makes seperating your spending money easier, since you simply load your card with the amount you want to spend and go. It still offers rewards that compare to regular credit cards, like 2% cash back on three spending categories of your choice, meaning you could earn 2% back on your groceries, transportation, or dining out. While this card won’t help you build your credit score, it gives you the perks and convenience of using a credit card without the risk of overspending. And if you do want to repair your score, you can use their credit building feature.

Best credit card for newcomers to Canada

Scotia Momentum No-Fee Visa

 One of the challenges many newcomers to Canada face is that they have no credit record in this country. Just like having a bad credit score, having none can really hinder a person’s ability to apply for a loan or mortgage, or initiate a relationship with their bank. The Scotia Momentum No-Fee Visa helps people start building their credit with a no-fee card that earns cash back rewards on everyday purchases. Receive 1% back on eligible gas, grocery, and pharmacy purchases, and on recurring payments. Anything you spend elsewhere will earn at a rate of 0.5%. The welcome bonus gives new members a head start on their cash back with 5% cash back on all purchases for the first 3 months (up to $2,000 in total purchases). And, if you have debt on a higher interest card, you might consider moving it over to the Scotia Momentum No-Fee Visa. The 2.99% introductory interest rate for the first 6 months just might be the leg up you need. 

How to get approved for a credit card with bad credit

Having a credit card and using it responsibly are pretty powerful ways to repair your credit history and credit score. But you’ll have to be strategic with the card you choose to apply for. Expect to qualify for cards with fewer perks than the popular credit cards available, as well as less favourable terms or even cards that require a deposit. Once you begin establishing your creditworthiness, you can upgrade to a card with better rewards and terms.

There are several ways to go about getting a credit card if you have bad credit.

1. Secured cards mitigate the risk of those with bad credit by attaching collateral, usually in the form of a monetary deposit that can be used to cover unpaid debt. There are many options (including the best credit cards for bad debt), so you should be able to easily locate one that works for you.
2. Unsecured cards do not require collateral so they can have a slightly higher threshold for qualification. Those with a fair rating may be able to get one. Aside from not requiring a deposit, these cards sometimes come with some perks like points or cash back. 
3. Pre-paid cards are what they sound like: Credit cards that you load with money prior to spending, rather than paying off your debt on a monthly basis. These cards are really useful for those who have trouble sticking to a budget, and because they have to be pre-loaded, you can’t overspend.
4. No-frills cards are essentially stripped-down cards specifically tailored for those with bad credit. Many big banks offer these as part of their credit card range. These may not offer any perks and benefits but they can help you improve your financial picture. 
5. Smaller financial institutions frequently have special offers or unique products to try and attract new customers. If a big five bank won’t lend you money, try a lesser-known but trusted (and insured!) lender. 
6. Fintech, short for “financial technology,” is a broad term for any type of technology that’s used in place of traditional financial services—and it’s actually a burgeoning industry in Canada. Fintechs offer a wide variety of products and services, including secured credit cards, loans, credit building tools and budgeting tools. And many are specifically designed for people with bad credit history and scores. 

Search for credit cards, personal loans. Once you’ve researched which cards you might qualify for… wait. Every application you send in will affect your credit score, so you want to be thoughtful about when and how you apply. Compare your options, paying close attention to fees, interest rates, repayment terms and available perks. When you’ve made your prioritized list, it’s time to submit your first application. And be completely honest with your application. Wait for the response before moving down your list. Most creditors have a very quick turnaround so it’s not worth making multiple submissions to only jeopardize your credit score.

What is a bad credit score in Canada?

Your credit score is expressed as a number, generally between 300 and 900, that represents how credit-worthy you are. Meaning: How much of a risk you could pose to lenders or creditors to not pay money back. Your score is affected by all sorts of variables including the amount of debt you carry, whether you repay in full and on time, and even how long your credit history is. The higher your credit score, the better. 

Credit scoring models do differ, so each institution can have its own metrics for what scores of “good” and “bad” are. But generally, a credit score of 760 and over is considered “excellent.” Scores between 660 and 759 are “good” or “very good.” And most lenders will accept the risk associated with these borrowers. If your credit score is below 660, you may have trouble finding a creditor—or if you do, the terms may not be optimal. 

Just as your financial habits created your credit score, so they can improve it. Here are the five variables that most affect your credit score, with the most impactful first. 

1. Payment history refers to whether you pay your bills in full and on time, as well as if you’ve missed any payments and how long you were in arrears (had money owing). 
2. Debt load is the total amount of money you owe creditors, including credit cards, personal loans and mortgages.
3. Types of credit you carry (such as credit cards, mortgages, personal or business loans, and retail accounts) affect your credit score. The more creditors you’re beholden to, the more of a risk you might pose to the financial institution.
4. Loan applications affect your credit score too. Each time you apply for credit, your score takes a small but temporary hit. This is because it signals to lending institutions that you need credit. This is completely normal and to be expected, but worth understanding so you don’t apply for multiple sources of credit, over a short period of time. 
5. Credit history counts too. You might think that if you’ve never applied for credit, your score would be perfect. But that’s wrong! Having a credit history is important as it shows lenders that you’re capable of repaying your debt. This is why you should apply for a credit card early, and use it responsibly.

• Establishing your credit score as a newcomer to Canada

  Unfortunately, if you’re a newcomer to Canada, your credit score from your home country won’t follow you here. As a result, your credit card choices may be more limited, but this also means you can start building a new score from scratch—which, for some, can be a positive. One approach is to use a secured card to help you get started, with the goal of graduating to a better, unsecured card. 

  Another way to build your Canadian credit score might be through a program for newcomers at one of the banks. For example, Scotiabank’s StartRight program is designed specifically for newcomers to Canada, providing access to credit, a savings account, no-fee international money transfers, and help from the bank’s financial advisors. Similarly, BMO’s NewStart Program can issue you a credit card, a bank account, a safety deposit box, and even mortgage options.

  MORE ON CANADA’S BEST CREDIT CARDS:

• Overall Best Credit Cards in Canada
• Best Low Interest Credit Cards
• Best Balance Transfer Credit Cards
• Best No Foreign Transaction Fee Credit Cards in Canada