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Having a good credit history helps with getting a variety of approvals for  accommodation, cars, school loans etc. If you have no history or a bad history, you’ll need some help building your credit. We talk about the best secured credit cards available for you to do that.

Advantages of a secured credit card

A long and extensive credit history is very important in life. With no credit, it’s harder to get approved for loans such as car payments, mortgages, school loans etc. But with no previous credit or bad credit, financial institutions are less likely to give you a credit card or increase your credit limit. This is why people opt in for secured credit cards.

How do secured credit cards work

Imagine you go to a restaurant and you find out you left your wallet in the car; you tell the server that you need to get your wallet to pay. In order to ensure you come back without skipping the bill, the server will probably ask you to leave a valuable possession at the restaurant, like your phone. The server knows that you probably won’t run off on the bill because they have something of yours. That’s how secured credit cards work.

Most credit cards are unsecured, you have no guarantor, i.e. nothing ‘secures’ your ability to pay off your debt. Although you’ve promised to pay off your debt in part or in full, you have no assets or income tied up with the bank to hold you to that promise. With secured credit cards, you have to put up a collateral with the card company. When you apply for one, the card company will run a hard inquiry (link to hard inquiry faq), with a credit reporting agency like Equifax or TransUnion. They will that information to determine the deposit needed to open the account and the amount of credit available to you. therefore, the deposit required becomes your credit limit.

Secured credit cards work just like a regular credit card, the only difference is that you pay a deposit to get one. They are issued by the leaded credit card lenders; like Visa and MasterCard and are accepted everywhere. Cardholders are expected

Secured credit cards are geared towards people with bad credit or little to no credit history, i.e. people who would have a hard time qualifying for a regular credit card. If you use a secured credit card responsibly for six months or more, then it can have a positive impact on your credit score. This positive history is gotten by paying off balances in full every month, paying on time, having a good credit score ratio (potential blog post?). By doing this, you’re able to build your credit history and boost your credit score.

Best secured credit cards to build credit

1. Capital One Guaranteed Secured MasterCard (Quebec friendly)

The Capital One Guaranteed Secured MasterCard is a top choice for people building credit. Apart from the fact that approval is guaranteed, it is supported by Mastercard, meaning it is accepted almost everywhere. The card also has a built-in liability protection against fraud, making it very attractive.
  • Guaranteed approval
  • Interest rate: 19.8% APR, 19.8% CAR
  • Annual fee: $59
  • Minimum deposit required: $75- $300

2. Refresh Financial Secured Visa (Quebec friendly)

The Refresh Financial Secured Visa guarantees that every application will be successful as long as the applicant makes the minimum deposit. Not only does this card come with a low annual fee and low interest rates, it has other low fees; 0.50 to pay a bill and 0.10 if a transaction is declined. The first time you go over your credit limit, you’re charged $5, but if it happens again, the card is cancelled. Which helps keep people in check but can also be scary for others. Refresh Financial Secured Visa charges $2 every month that you don’t use the card, so it’s only recommended for active card users.

  • No credit check involved
  • Interest rate: 17.99% APR, 17.99% CAR
  • Annual fee: 48.95 or $3/month + 12.95
  • Minimum deposit required: $200

3. Home Trust Secured No-Fee Visa (NA Quebec)

With no annual fee, the home trust secured no-fee visa is a great card for people who are looking to build their credit. It comes with a standard 21-day grace period on all new purchases so if you pay your balance off within that period, you can avoid higher interest rates. While users are permitted to go over their credit limit, they’re charged $29 each time this happens. Although there is a credit check involved, it has a high approval rate.

  • Credit check involved
  • Interest rate: 19.99% APR, 19.99% CAR
  • Annual fee: $0
  • Minimum deposit required: $500

4. Home Trust Secured Visa (NA Quebec)

This low interest card by Home Trust is great for people who plan to carry over a balance from month to month. There is a credit check involved but it has a high approval rate, and almost everyone gets approved. There is a $29 over limit fee, and a $45 non-sufficient fund fee, so cardholders should work hard to stay under their limit.

  • Credit check involved
  • Interest rate: 14.9% APR, 19.8% CAR
  • Annual fee: $59
  • Minimum deposit required: $500

Best secured credit cards in Canada

1. Bank of Montreal (BMO) Prepaid MasterCard

The BMO Prepaid MasterCard uses a prepaid model for its secured credit card option. With zero % interest rate, low annual fee, minimum deposit and Mastercard options, it’s a great card for building credit. However, because it uses a prepaid model, you can’t spend more money that you have in the account or take cash advances. It’s a good choice if you’re not planning on spending over your limit and are looking for lower interest rates.
  • Interest Rate: None
  • Annual fee: $6.95
  • Minimum deposit: $100

2. Toronto-Dominion (TD) Cash Secured Credit Card

The TD Cash Secured Credit Card involves you opening a TD simple savings account to hold your security deposit. When the savings account has been opened and funded with your approved credit limit, the account frozen and you get your credit card which you can then use to build credit. This card is great because it gives you the option to graduate to an unsecured TD Bank Credit Card
  • Interest rate: 24.99% APR, 27.24% CAR
  • Annual fee: $29
  • Minimum deposit: $500

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