Having poor or no credit can make it difficult to be approved for credit products such as credit cards, loans and mortgages – but it doesn’t have to be the end of the road. The first step you can take towards building your credit is applying for a secured credit card.
To use a secured credit card you’ll need to put down an initial security deposit. Once you use the card and begin making timely payments, your credit score should slowly climb, assuming your card reports to the two major credit bureaus.
Secured credit cards that don’t charge an annual fee
When it comes to no annual fee secured credit cards, you’ve really only got one choice: the Home Trust Secured No Fee Visa. That said, some of the big banks like TD sometimes offer secured credit cards – but they typically don’t advertise them online. You’ll need to visit a branch in person or call to find out if any no annual fee secured cards are available.
Home Trust Secured No Fee Visa
Home Trust offers a secured visa card that acts as a revolving line of credit. You submit a security deposit at the time of application, and, if approved, your deposit becomes your credit limit. Charge purchases to your card, get cash advances and make payments just like a non-secured credit card. Your security deposit will be returned if you close your account, after all purchases and fees have cleared.
The best part? This card lets you choose between 2 options:
No Annual Fee Option with a 19.99% purchase rate.
Low-Rate Option with a purchase rate of 14.90% and an annual fee of $59 (or $5.00 monthly).
By opting for the higher purchase rate, you can avoid paying an annual fee.
Choose between no annual fee and a lower interest rate. If you choose the No Annual Fee Option, you’ll pay 19.99% interest on your purchases. Alternatively, you can choose to pay a lower interest rate but be charged an annual or monthly fee for your card.
Control your credit limit. The amount of security deposit you offer up will determine your monthly credit limit. Credit limits range from $500.00 to $10,000.00.
CDIC insured. Home Trust is a member of the Canada Deposit Insurance Corporation (CDIC), so your security deposit is safe even if the company fails.
Authorized user. Cardholders have the option of adding one authorized user to their account.
Credit check. Home Trust will check your credit report for this card, however the approval rate is quite high.
Higher rate (No Annual Fee Option). The no annual fee option comes with a higher purchase rate of 19.99%.
Maintenance fee (Low-Rate Option). The low rate option comes with an annual fee of $59.00 or $5.00 per month.
ATM fees. Every time you withdraw funds from an ATM, you’ll be charged a percentage fee ranging from 1.00-1.50% (minimum $2.50, maximum $15.00). Different fees apply for withdrawals in Canada, the US and other countries.
Eligibility restrictions. This card is not available in Quebec. Additionally, you don’t qualify if you’re currently in bankruptcy, however, you can qualify once you’re discharged.
How to choose the right no annual fee secured credit card
To choose the best no annual fee secured credit card, ask yourself:
What’s the purchase interest rate?
Although the goal is to pay off your balance in full each month in order to improve your credit score, the purchase interest rate will be important if you think you’ll carry a balance between billing cycles. Some secured cards may offer interest rates as low as 12.99%.
How much credit do you need access to each month?
Your deposit will serve as your credit limit, so if you provide $500.00 as a deposit, your monthly credit limit will be $500.00. To increase your credit score, you’ll want to keep your credit utilization ratio below 30%. This means you’ll want to hold a balance of $150.00 or less a month if you have a $500.00 card.
What are the minimum and maximum credit limits set by the provider?
Credit limits for secured cards might be as low as $200.00 and as high as $10,000.00. Consider how much credit you’ll need access to each month and plan accordingly when submitting your deposit.
Does the provider report to the credit bureaus?
It’s important to know that the provider will report your payments to the 2 major credit bureaus (Equifax and TransUnion). If the provider doesn’t report to the bureaus, your credit score won’t change.
If you’re looking to build or rebuild your credit, a secured credit card could be a great solution. While your options are slim, you can find a no annual fee secured credit card to help keep your costs to a minimum.
If you think you could benefit from a secured card that charges a low monthly fee or an annual fee, compare more secured options in the table below. However, if you believe there could be a better secured credit card for you, compare your other options here until you find the perfect card for your spending habits and financial needs.
Yes. To minimize risk, most secured credit card providers charge an annual fee. Many will charge a monthly fee instead of an annual fee.
Your credit utilization ratio is the total amount of credit you are using divided by the total amount of credit you have access to. Providers like to see a credit utilization ratio of 30% or less, and your ratio will affect your credit score.
If you have only one credit card with a credit limit of $1,000.00 and you carry a balance of $300.00 on it each month, your credit utilization ratio will be 30%.
Emma Balmforth is a producer at Finder. She is passionate about helping people make financial decisions that will benefit them now and in the future. She has written for a variety of publications including World Nomads, Trek Effect and Uncharted. Emma has a degree in Business and Psychology from the University of Waterloo. She enjoys backpacking, reading and taking long hikes and road trips with her adventurous dog.
2M7 provides up to 125% of your average monthly sales in a merchant cash advance that you’ll repay incrementally based on your daily sales transactions.
Tangerine’s Visa Debit Card comes with unlimited free transactions. It allows users to safely shop online and make purchases while abroad like a credit card wherever Visa is accepted.
Do you need a car loan but you don’t have the best credit? Canada Auto Finance connects you with local dealers to help you secure auto financing at competitive rates to help you buy a car.
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