If you have a poor credit history, or don\u2019t 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.<\/p>
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.<\/p>
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 \u201ccollateral\u201d 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<\/a>.<\/p> Other than the security deposit, a secured credit card works exactly like an unsecured card: You build your credit score<\/a> by making purchases on the card and paying your balance on time each month.<\/p> The money you deposit as collateral \u2014 usually between $200 and $10,000 \u2014 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.<\/p>The 2 best secured credit cards in Canada<\/h3>