If you have a poor credit history, or don’t have a credit score at all, getting a secured credit card might be your best option for restoring or building financial health. Most secured cards require you put down a security deposit which typically serves as your credit limit. This security deposit also serves as collateral for your credit card provider in the event you miss payments, which makes creditors more likely to approve your application regardless of your credit score.
Using your secured card responsibly and paying your balance in full each month will start improving your credit score so you can graduate to an unsecured credit card.
| Annual fee | $12.95 |
|---|---|
| Purchase APR | 17.99% |
| Balance transfer APR | N/A |
| Recommended minimum credit score | 300 |
| Annual fee | $0 |
|---|---|
| Purchase APR | 19.99% |
| Balance transfer APR | N/A |
| Recommended minimum credit score | 300 |
| Annual fee | $48 |
|---|---|
| Purchase APR | 0% intro for the first 3 months (then from 17.99% ) |
| Balance transfer APR | N/A |
| Recommended minimum credit score | N/A |
| Annual fee | $59 |
|---|---|
| Purchase APR | 19.8% |
| Balance transfer APR | 19.8% |
| Recommended minimum credit score | N/A |
A secured credit card is designed to give people with no credit history, or a bad credit score, access to a credit card in order to build up their credit rating. A secured credit card is much easier to qualify for than a typical unsecured card because lenders are less concerned about your credit score when determining your eligibility. Instead, you provide a security deposit on the card, which serves as “collateral” for the card. Lenders can collect that security deposit if you default on your payments, making them much more willing to approve you for a credit card, even if you have a bad credit score.
Other than the security deposit, a secured credit card works exactly like an unsecured card: You build your credit score by making purchases on the card and paying your balance on time each month.
The money you deposit as collateral — usually between $200 and $10,000 — often becomes your monthly credit limit. After a few months of on-time payments, you may be eligible to increase your limit. Your deposit will be returned to you once you pay off your balance and cancel your card. Keep in mind that unlike unsecured cards, secured cards rarely offer additional perks such as cash back, rewards points or travel insurance.
Most secured cards report your activity to the two major credit bureaus in Canada: Equifax and TransUnion. Many secured cards also offer monthly credit score checks so you can track your progress. Providers occasionally offer educational tools as well to help you get back on track.
Using your card regularly and responsibly can help your credit score increase. Providers tend to see a credit score of 650 as the “magic number”, which, once you’ve reached or surpassed this number, may open you up to the world of unsecured credit cards. Some secured card providers offer an opportunity to graduate to an unsecured version of the card – provided you show financial responsibility over a certain period of time.
What other factors go into a credit score?
Yes, many secured credit cards don’t require credit checks for approval. And no credit check secured credit cards work like all other secured cards – the deposit you put down on the card becomes your credit limit. Your provider can use that deposit to pay off your balance if you default on your payments. Otherwise, you’ll get it back when you close out your card and make your last payment.
Secured credit cards with no credit check are ideal to build up your credit score, as you won’t need to have good credit score to qualify. Unfortunately, you have to pay interest on most secured credit cards with no credit checks and they usually don’t come with benefits or rewards.
Multiple hard credit checks, or “inquiries,” in a short time could lead lenders to consider you a high-risk customer. If you’re applying for multiple credit cards at once, it may suggest that you’re short on cash or preparing to rack up a lot of debt. That’s why it can be helpful when you’re shopping around for secured credit cards to apply with lenders that don’t do credit checks.
Compare secured credit cards with no credit check
Secured credit cards can be ideal for the following people:
Even if you fall into one of these categories, it’s still possible to be denied for a secured credit card.
Because secured cards are designed for building credit, there are some trade-offs to consider.
Choosing the right secured credit card is important for making sure you end up with a card that will help you rebuild your credit score. Once you’ve reviewed your options, follow these simple steps to apply for a secured card.
While it can vary between providers, you’ll typically need to provide the following information when you apply for a secured credit card:
The exact requirements to qualify for a secured credit card will vary depending on the type of card and the specific lender you choose to go with. That being said, most providers require you to meet these basic eligibility criteria:
You can follow these 5 steps to apply for a secured credit card:
Secured credit cards are often used with the goal of graduating to an unsecured card as soon as you’ve improved your credit score enough.
Some secured card providers will offer you the chance to upgrade to an unsecured card once you’ve increased your credit score and proved that you’re a responsible and trustworthy borrower. If you’re provider doesn’t offer an unsecured card, consider applying for one with a different provider once your credit score is in the good range: about 650 or higher.
Once you decide to close your secured credit card account, you’ll need to pay off your balance in full before you receive your deposit back.
A secured credit card’s deposit is similar to the deposit you put down when renting an apartment. Just as a rental deposit protects a landlord if a renter doesn’t pay, the deposit on your secured credit card protects the provider should you find yourself unable to make payments.
The amount you provide as a deposit will usually serve as your monthly credit limit. So if you provide the lender with $300, your monthly credit limit will likely be $300.
Yes, most secured credit card providers require a deposit which serves as collateral in case you fail to pay your balance. If you’re looking for a low minimum deposit, consider getting the Capital One Guaranteed Secured Mastercard offers a minimum deposit amount of just $75, with a credit limit of $2,500. However, if you’re looking to pay a bigger deposit in order to get a higher monthly credit limit, a card such as the Refresh Financial Secured Card offers a minimum of just $200 and a maximum limit of $10,000 – which can prove valuable if you’re looking to make a big purchase.
Before receiving your secured credit card, you’ll need to save up some cash to put down as your deposit. Your plan to get a secured credit card must involve a saving strategy that begins with knowing your fixed expenses. Developing new spending habits can yield a lot of savings, but a little assertiveness won’t hurt either.
To avoid late payments, set up payment alerts and autopay for your bills. A free budgeting app such as Mint can be particularly helpful. Use it to set financial goals, track your spending, view your credit score, keep tabs on your investments and balances, pay bills and receive alerts.
A free mobile banking app can also help you set aside money. For instance, the Nomi Find & Save by RBC works by moving money from your chequing or savings account to a separate account when you receive your pay or other regular income.
Many communities offer low-income assistance programs for gas, electricity and other utilities. Also, if you initially put down a deposit for your utility accounts, ask if you can have it refunded after about a year of timely payments. Some utility providers automatically refund deposits after you’ve established a reliable track record of payments.
Reducing your overall expenses is key to taking control of your personal finances. Even seemingly small steps like installing a programmable thermostat to lower home heating costs, changing your lightbulbs to LEDs or seeking out Energy Star–labelled appliances matter to your long-term financial success. Some services even offer rebates that partially cover the cost of a programmable thermostat.
Examine your cell phone and landline service plans, and talk to your providers about ways to bring down the costs. To get a clearer sense about whether your cell phone plan is right for you, install a free app to track your data use. If you’re not close to hitting your limits, consider a cheaper no-frills plan. Using a prepaid carrier or joining a friend or family member’s plan can also reduce your monthly smartphone tab.
Join the growing number of cord cutters by exploring whether Netflix, Amazon Prime Video, hayu or Crave can replace your cable bill. If you aren’t ready to ditch cable, call your provider to negotiate a cheaper deal.
If you live far from work, consider asking your employer if working from home — either one day a week or several — is possible.
For good measure, evaluate public transportation, particularly if you live in or near an urban centre where trains, buses, carpooling and carshare services are available. For those who don’t need a car daily, taxis, rideshare services — like Uber and Lyft — or simply renting a car or using a carshare here and there can save money.
If you do drive, apps like GasBuddy and Gas Guru can steer you to the best gas deals along your route. Also, check if your auto insurance provider offers multiline policies: Bundling your auto and home or rental insurance into a multiline policy can typically shave 10% to 15% off your overall bill.
Secured credit cards should always be the secondary option to unsecured credit cards when it comes to building and utilizing credit, because unsecured cards come with more perks and don’t require a security deposit. As such, secured cards should be one of your first fallback choices if you’re denied an unsecured credit card.
You could also consider these other financing alternatives instead of getting a secured credit card:
Secured credit cards are designed for individuals with a poor credit score, limited to no credit history and who have difficulty qualifying for an unsecured credit card. These cards are structured to operate on a security deposit with a smaller credit limit to encourage responsible use and help you build your credit.
Depending on the card, you may not have to pay an annual fee and you could be offered limited cash back rewards. But most secured cards do not offer rewards, signup bonuses, and could come with a annual fee. If you’re not sure this kind of card is right for you, compare other credit builder cards here.
Learn how you can earn rewards and rebuild your credit score when you make purchases with the Plastk Secured Visa Card.
