Ratehub’s best secured credit cards
Want to rebuild your credit with a secured credit card. Just input your income and preferences and the MoneySense Credit Card Finder will provide a comparison of some of the best secured credit cards in Canada from Ratehub’s partners.
To view more secured card options and MoneySense’s editor’s picks, read our blog on the best credit cards for bad credit in Canada.
How does a secured credit card work?
You pay a deposit upfront in order to be approved for a secured credit card. The deposit serves as collateral, so it’s easy to be approved for these cards even if you have a bad credit rating. The spending limit on your secured credit card will be one to two times the security deposit you put down. If you miss your minimum payments, then the issuer may take money from your deposit to cover what you owe, but you cannot use the deposit yourself to make payments on your card. If you decide to close your account or to upgrade to an unsecured card, then your deposit will be returned.
Other than that, the card works just like a regular unsecured credit card. You can use it to buy things online, in stores, or to cover regular monthly bill payments, such as utilities or Internet service. If you carry a balance at the end of the month, you will be charged interest at the stated rate.
Do secured credit cards build credit?
Yes. In fact, building a better credit rating is the primary value of a secured credit card. Because payment history is such an important factor in determining a credit score, this is an excellent option for people who are new to the country, have no credit or poor credit, or have recently filed for bankruptcy. It is important to remember to be as careful making your credit card payments as you would with any other loan or bill payment. Missed payments can hurt your credit rating more easily than making payments can help it.
If you make your minimum payment on time every month, it’s possible to develop good credit in as little as a year. Once that happens, you may be able to qualify for an unsecured credit card and get your deposit back. It is good practice to use your secured credit card regularly but to use it sparingly. You want to be sure you can pay off your entire balance each month to avoid paying interest.