Canada’s best credit cards for people with bad credit 2021

Best credit cards for bad credit in Canada

Secured credit cards vs unsecured credit cards

Sure, your credit history will limit you in what card you are approved for, but that’s not to say you don’t have any choices. In fact, using credit to rebuild your credit score, you’ll need to choose between a secured and unsecured credit card. A secured credit card is one that’s 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. 

That said, 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.

Best secured card (no fee)

Home Trust Secured Visa (No Annual Fee)*

The Home Trust Secured Visa stands out because it’s a secured credit card with no annual fee (a nice bonus when getting a new card). To open an account, you need to make a $500 deposit. And while the interest rate is standard at 19.99%, this won’t kick in unless you carry a balance—and if you’re looking to build your credit, you should aim for that not to happen. As with other secured credit cards, you can improve your credit score by making payments on time, and preferably in full. Note: If you don’t use your card at least once a year, there is a $12 inactivity fee. So make to charge at least one purchase to the card annually. 

• Annual Fee: $0
• Interest rate: 19.99% on purchases
• Min Deposit: $500

Note: This card is not available to residents of Quebec.

Get more details about the Home Trust Secured Visa (no fee)*

Best secured card (low interest)

Home Trust Secured Visa (Low Interest)*

There is another Home Trust on our list. Like the Home Trust Secured Visa above, this low-interest option is a secured card that can be opened with a deposit of as little as $500. And if you need a higher credit limit, you can deposit more, up to $10,000. Before you pshaw the $59 annual fee, the Home Trust Secured Visa credit card offers much lower interest rate of 14.90% on card purchases. And that will save you money should you have to carry a balance. You also have the option to pay 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. Most applicants are approved for his low-interest card.

• Annual fee: $59
• Interest rate: 14.90% on purchases
• Min Deposit: $300

Note: This card is not available to residents of Quebec.

Get more details about the Home Trust Secured (low interest)*

Best secured card (rewards)

Plastk Secured Visa Credit Card*

Cards aimed at those with bad credit have traditionally been stark, pared-down products, designed only to help the cardholder repair their credit and without the benefit of rewards or bonuses. The Plastk Secured Visa breaks that mold by offering rewards on everyday purchases along with a worthy welcome bonus. 

The earn rate is modest—1 point per $1 spent—and you’ll need 250 points for $1 in cash back, making 1 point worth about $0.04. Still, the ability to earn anything with this type of card is a big draw. In addition to using them for cash back, you can redeem your points for merchandise, travel and hotel rewards or gift cards. And you won’t be starting from scratch. The Plastk Secured Visa gets you started with a welcome bonus of 5,000 points (worth $20) plus 0% APR for your first three months. (APR is the annual percentage rate, which includes the interest and fees.) 

Another reason to slide this in your wallet: The Plastk card offers a slightly below average interest rate of 17.99%. There’s an easy payment system with Interac e-Transfer, and you get monthly updates of your credit score so you can track your progress. As a Visa card, it is widely accepted. 

There is no minimum income requirement. Instead, to use the Plastk Secured Visa you’ll have to make a security deposit of $300 to $1,000. Also note, there is a $48 annual fee. 

It’s encouraging to see a rewards card aimed at those with poor credit. That said, it’s important to resist overspending to earn rewards. Everyone, regardless of credit rating, should be mindful of spending within their means and aim to pay off their balance in full each month. 

• Annual Fee: $48 (plus $6 monthly fee)
• Sign up bonus: 0% interest rate for the first 3 months and 5,000 rewards points ($20 value)
• Perks: Earn a base of 1 point per $1 spent
• Min Deposit: $300

Get more details about the Plastk Secured Visa*

Best unsecured 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 14.9% interest rate and access to a few perks including price protection, travel benefits and insurance. 

If you don’t qualify for the un­secured Capital One Low Rate Gold, Capital One will still approve you for their alternative secured product, the Capital One Guaranteed Secured Mastercard. It 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 on the list 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—it offers further tools for those with bad credit 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 you know to sign up for the card, which isn’t going to dig you out of debt on its own but is 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*

How to rebuild your credit with a secured (or unsecured) credit card

Once you’ve chosen a card from above, it’s time to think about rebuilding your credit score. Remember that as time passes and you use your credit responsibly, the credit bureau will automatically adjust your score. Here are some other rules to keep in mind:

• Always pay your credit card bill on time. This should go without saying, but it’s crucial to pay at least your minimum payment every single month. If you easily lose track of due dates, set up an automatic payment with your online bank or use alerts in your calendar. A missed payment can set you back.
• Use your card. Yes, you read that right. Part of the point of having a card is to rebuild your credit reputation, which means demonstrating responsible use. You are not simply trying to pay down debt but show you can be trusted with a loan. Using your card even for small purchases and paying off that debt in a timely fashion is the best way to do so.
• Pay off your balance in full. And pay it off every month. Even though credit card use is an important part of building your credit, you should not run a balance, as doing so will not only cost you in terms of interest, it can also hurt your credit score by increasing your credit utilization ratio—that’s the amount of debt you carry in comparison to the amount of credit you have.
• Don’t max out your card. When future lenders look at your usage history, they’ll want to see that you put no more than 30% of the maximum allowed on the card. Otherwise, you might seem overextended. 

If you’re struggling under the burden of a bad credit score, finding an appropriate credit card can be a strong first step. With consistent and responsible use, you can rebuild up your reputation and, over time, access the financial benefits you need.

Establishing your credit score as a newcomer to Canada

If you’re a newcomer to Canada, unfortunately your credit score from your home country won’t follow you here. While your credit card choices may be more limited, this also means you can start building a new score from scratch which, for some, can be a positive. One way 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, bank account, 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