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, 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. 

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.

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’s 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)*

Here’s another Home Trust card 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, know that this card offers a much lower interest rate of 14.90% on card purchases—and that’ll save you money if you have to carry a balance. 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. 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.) 

More reasons to slide this into 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. and because it’s a Visa card, it’s widely accepted. 

There is no minimum income requirement. Instead, to use the card, you’ll have to make a security deposit of $300 to $1,000. (Also note, there’s 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 (a $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 interest rate of 14.9%, and access to 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 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*

Honourable mention

Koho Visa*

If you’re looking to repair a bad credit score, this unique reloadable, prepaid Visa should be on your radar. To watch as you improve your credit standing, you’ll have to opt into a credit-building feature ($7 a month), but the process is streamlined and simple. Since it’s designed to help you better manage your money, you’ll also gain access to the app’s financial tools for budgeting and saving. Here’s how it works: You load it with funds like you would a chequing account, and you can use the card like you would a traditional Visa, without having to worry about the daunting bill at the end of each month. Aside from helping to prevent overspending, this card has no annual fee, no interest charges, and you’ll earn 0.5% cash back on all of your purchases.

Get more details about the Koho Visa*

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